How To Get a Mortgage Forbearance Agreement
A mortgage forbearance is something you might consider if you encounter a temporary financial setback that causes you to fall behind on your mortgage. An example of this would be a health problem or a job loss where your prospects of recovering your original income are quite likely.
Remember that mortgage lenders are generally willing to work with homeowners to find a solution to avoid foreclosure if a feasible repayment plan can be worked out. In a forbearance, the lender agrees to temporarily cut or suspend mortgage payments until the homeowner can start paying a full mortgage payment again plus making up the missed payments.
A forbearance is typically only a viable option if you can show certain types of hardships that your lender approves of and that your income is expected to return to normal in less than 6 months, on average. Remember, a forbearance won’t help you if you’re have purchased a home that you can’t afford. In my experience, managing a forbearance is only possible if your regular payment amount is less than 30% of your monthly take home pay. Since loans are often made for more than this it may not be possible for a forbearance plan to work for you. In that case, you should pursue different options.
In order to grant a mortgage forbearance, mortgage lenders want to see that the delinquency was caused by an unexpected financial circumstance such as illness or injury. Some will accept a job loss as long as it’s a temporary situation. Surprisingly, few lenders will accept natural disasters such as a fire, flood or storm damage as a reason for a forbearance. The reason for this is that the property isn’t inhabitable and this increases the chance that the homeowner won’t continue to make payments. Beyond just the reason, the mortgage lender has to be assured that the borrower has a sound and reasonable plan to return to fiscal stability and can be relied upon to stay current on their mortgage payments afterward.
To begin a mortgage forbearance you should get in contact with the lender’s loss mitigation department. A customer service flunky or a collections agent won’t be able to help you with this. It is important that you take complete and careful notes about your interaction with this department. Stay polite and calm while you speak to them and in any written communication with them. It’s best to begin by asking for a homeowner’s assistance package or a forbearance agreement application. Sometimes the lender’s representative will ask you for details on your situation in writing although some will take a statement over the phone.
In general, most lenders will be willing to enter into a forbearance agreement if there are 3 or fewer delinquent payments on the the account. If there are more, it is quite rare for them to negotiate an agreement. If you aren’t behind on your mortgage, then it is unlikely that they will be willing to negotiate an agreement with you until you are actually behind on payments.
A forbearance agreement generally calls for the borrower to pay back the loan delinquency within 3 to 12 months, usually by making an extra 1/2 payment each month including interest and late payment fees. Sometimes lenders will remove late payment fees but sometimes not, however, it doesn’t hurt to ask about this. Occasionally, they will tack on an inspection or appraisal fee. They will do this to insure that you’re still occupying the home and that the property hasn’t been abandoned. Lenders generally prefer a gradual repayment plan instead of a lump sum payment although some may accept this if the source of the funds can be verified. It is almost unheard of for a lender to extend the pay back time for more than 12 months so make sure any proposed repayment plan fits well within this timeframe.
Make sure that you carefully read any forbearance agreement you receive from the lender. If you’re unsure about any part of it, consult with the lender and with an attorney. Some lenders will try to sneak in additional terms and conditions that may cause you difficulty.
It is important not to abandon the property while you’re working under a forbearance agreement. Not only does this indicate to the lender that you’re likely to default on the loan, it may also disqualify you from tax advantages as well as government programs intended to help distressed homeowners.
Of course, a forbearance agreement will only work if you’re on solid financial ground where you will be able to overcome a temporary financial setback. If this isn’t true in your case you should examine other options that are more drastic than a forebearance.
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To whom it my concern
we have been trying to modify our home loan with First Franklin loan services for over 1 year we where never late before on any bills or mortgage my husband had gotting laid off from a good paying job in 2/08 we used all our saving to try to keep up and I am on medicare disability, my husband had to take a commission only job he is a car salesman,make alot less income I believe because of his age we are 63 years old we don’t want to loose our home we have no where to go our income is only about 40,000.00 a year now. we got caught in a very bad deal when we refi our last mortgage now our mortgage is so high and does not include taxes or homeowners we pay seperate our payment is 1716.85 a month plus ins and taxes is $155.14 a mo-$116.89 -a mo homeowners our income per month is only $3,315.00 plus our other expences,electric, water,trash,car payment car ins, phone,etc, please can someone help us so we don’t loose our home. thank you the Kappler family, please email any results to try to help what we can do for us. again many thanks
Hi Charles/Barbara,
The bad news, as best I can tell from the info you provided, is that it probably won’t be possible for you to stay in your home unless you were to dramatically increase your income. You have over 50% of your income going toward housing and that just isn’t sustainable even if you cut other expenses to the bone. You have to get it below about 33% of your take home pay to have a chance at making it work. You’ll have to do this by either getting your take home income up to about $6000 or getting your mortgage adjusted down to around $1000 a month (which would be tough).
If this isn’t going to be possible within about 3 months time you’ll need to consider other alternatives such as a short sale or deed in lieu of foreclosure. You’ll want to negotiate this with your mortgage lender so stay in contact with them and let them know your situation. You want to work on getting into a scenario where you can get out of the mortgage where you can avoid an outright foreclosure as well as avoiding the lender trying to come back and get the difference between what the house ultimately sells for and the value of the mortgage.
If you need help, contact a HUD approved housing counselor in your area who is willing and able to help you and who has knowledge of laws that apply in your state. Avoid getting caught up in any refinance scams because there are a lot of them out there today. I also recommend checking out what Dave Ramsey has to say about real estate and other financial matters. His advice has been very helpful to me.
I did a loan modfication with frist franklin loan services on my 1st and 2nd loan in Nov, 2009, In Aug 2010 Bank of american took over my loans, Now BofA is saying I my second loan was a non forbearnce loan and has sold my loan to another lender. I was told by frist Franklin under the loan modification that sence I had a jumbo loan over &758,000. that my home was apprised for 628,000.00 under my taxes. And my 2nd loan was put into my 1st and my payment where lowered. I not sure what a non forbeance loan is, can you help me with this. BofA has never sent out a statement to me for my 2nd loan.
Thank You
I feel like there is no help to keep us from losing our home. Since the birth of our child, expenses have increased. We did a home loan modification which saved us a whopping $10. After the savings, the escrow was increased and our payment increased $20. So, there was no savings. How can we get help?
Thanks
Sorry about the late response.
The basic problem that many people are having right now is that the owe more than the house is worth and it’s unlikely that the value will increase in price anytime soon. If this describes your situation you have to take your current finances into account. First off, make sure you have a monthly written budget so that you know where your money is going. Look at areas where you can cut back easily such as eating out often and entertainment expenses. Prioritize your bills to give your mortgage payment top priority after your basic needs (food, lights, water, etc). If you have high car payments or transportation costs then you may want to look at ways to trim these back as well. You may even need to sell a car if it’s killing your budget. Drastic cuts are needed since increasing income isn’t likely in the current economy. It’s not the most pleasant thing to do but it can really help.
If your monthly house payment is more than 25-30% of your take-home pay you should start looking for an exit strategy. This might be a short sale or even bankruptcy. This isn’t the ideal scenario either but being stuck with an asset that’s become a long term financial liability isn’t the best thing to do for your long term financial health.