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Mortgage Forbearance

What’s a Forbearance?

A mortgage forbearance is when the lender agrees to reduce or even suspend mortgage payments for a certain period of time and agrees not to initiate a foreclosure during the forbearance period. The borrower typically must resume the full payment at the end of the period, plus pay an additional amount to get current on the missed payments, including principal, interest, taxes, and insurance. In some cases, the forbeared amount may not need to be repaid until the end of your loan. The terms of the agreement will vary among customers and situations.

A mortgage forbearance agreement is not a long-term solution for delinquent borrowers; it is designed for borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems. A forbearance agreement may allow a borrower to avoid foreclosure until his or her financial situation gets better. In some cases, we may be able to extend the forbearance period if the borrower’s hardship is not resolved by the end of the forbearance period to accommodate the situation.

Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments when your financial situation has stabilized.

Benefits of a forbearance

  • We suspend reports to credit bureaus of past-due payments for borrowers in a forbearance plan
  • No penalties or late fees for borrowers in a forbearance plan
  • After forbearance, we work together on a permanent plan to bring your loan current

How do I get a forbearance?

To see if you qualify for a forbearance, give us a call. We’re here to help!

Mortgage Forbearance vs. Loan Modification

While a mortgage forbearance provides short-term relief for borrowers, a loan modification agreement is a permanent solution to unaffordable monthly payments. With a loan modification, we can work with customers to do a few things (such as reduce the interest rate, convert from a variable interest rate to a fixed interest rate or extend the length of the loan term) to reduce the monthly payments.

In order to be eligible for a loan modification, the customer must show that he or she cannot make the current mortgage payments because of financial hardship, demonstrate that he or she can afford the new payment amount by completing a trial period and provide all required documentation. The documentation required could include a financial statement, proof of income, tax returns, bank statements, and a hardship statement.