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Forbearance Agreement for your Mortgage Payment

A forbearance agreement is used when a Borrower falls behind on their mortgage payments. In essence, a forbearance agreement reduces or suspends mortgage note payments for a specified period of time. A repayment plan follows and includes the normal monthly mortgage payment, along with a payment to repay the delinquent amount.

Real estate forbearance agreements are generally reserved for Borrower's facing temporary financial setbacks. Borrowers must provide proof they can adhere to the repayment plan once the forbearance timeframe expires.

Since Borrower's will be paying a higher mortgage payment for one or more years, banks want to ensure issuing a forbearance agreement will not incur additional losses. Therefore, homeowners requesting a forbearance agreement plan should be prepared to undergo financial scrutiny.

As long as the Borrower adheres to the forbearance agreement, the lender agrees not to pursue foreclosure proceedings. However, if the Borrower falls behind on payments and does not adhere to the terms and conditions of the forbearance agreement, the lender can initiate foreclosure proceedings or offer alterative solutions such as accepting a short sale.

In order to qualify for a real estate forbearance agreement, homeowners are required to work with their lender's bank loss mitigation department. A personal bank loss mitigator is assigned to work with individuals and avoid foreclosure whenever possible.

The Borrower must provide proof a forbearance agreement is in the best interest of both parties. The loss mitigator will provide forms to the homeowner and request specific information. Once the Borrower submits this information, the loss mitigator reviews the information and assists the Borrower in deciding if a forbearance agreement is in their best interest.

Once the forbearance agreement is accepted by both parties, a repayment plan is established. The delinquent amount is factored into the repayment plan and includes past due payments, accrued interest and other fees charged by the lender. The repayment plan generally last for one to three years.

When the repayment plan has been satisfied, the mortgage reverts back to a regular account. The homeowner retains their home and the bank avoids foreclosure. A forbearance agreement provides a win-win situation for homeowners who are facing temporary financial hardships and lenders who prefer to keep their accounts out of foreclosure.

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Published on July 17, 2008 at 07:12 AM

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