Mortgage forbearance offers borrowers the opportunity to prevent foreclosure by providing temporary modification to mortgage terms. Banks occasionally offer forbearance agreements to borrowers experiencing short term financial setbacks such as unemployment, death of a spouse, or health problems which prevent them from adhering to their payment plan.

In order to enter into mortgage forbearance, borrowers must undergo a financial audit to provide proof they can make future mortgage payments. Once lenders enter into forbearance agreements they are prohibited from initiating foreclosure proceedings unless borrowers default on the deferment plan contract.

Homeowners must obtain mortgage payment forbearance through their lender’s loss mitigation department. Although lenders must abide by certain protocol, some banks are more lenient than others. All banks require borrowers to provide proof of income, financial records and a forbearance hardship letter outlining circumstances which caused them to become delinquent with home loan payments.

Borrowers will work with an assigned bank loss mitigator throughout the forbearance period. Loss mitigators act as a mediator between borrowers and lenders and do not make final decisions regarding mortgage forbearance acceptance. Loss mitigators review borrowers’ financial records, mortgage payment history, and submit recommendations to bank management.

Mortgage forbearance plans are not the same as mortgage refinance or loan modification. While each plan can assist in stopping foreclosure, they are fundamentally different. Mortgage refinancing and loan modifications permanently alter mortgage terms, while forbearance plans are temporary.

Forbearance agreements typically extend between three and six months. Some mortgage lenders require homeowners to submit a down payment toward mortgage arrears, while others will extend repayment of the outstanding balance over the course of the forbearance contract. Homeowners are required to submit their normal monthly mortgage payment along with additional funds to eliminate past due debt.

Borrowers should obtain necessary payment requirements and terms of the forbearance agreement from their assigned loss mitigator. Homeowners should be informed of the past due amount, accrued interest, late fees and penalties, monthly payment amount and payment dates. Mortgage forbearance contracts are legally binding contracts that must be signed by the lender and borrowers.

Lenders can commence with foreclosure action if borrowers default on the mortgage forbearance agreement. Homeowners should carefully weigh disadvantages prior to entering into a forbearance plan.

In some cases, it might be better to refinance home loans. Refinancing requires borrowers to apply for a new home loan to pay off the original mortgage note. Borrowers should review their loan documents to determine if prepayment penalties will be incurred when refinancing.

Most mortgage lenders include a prepayment penalty and charge settlement costs when refinancing occurs. Closing costs are the borrower’s responsibility and must be paid up front. Banks rarely include settlement costs when refinancing home mortgage loans.

A home is typically the most valuable asset people own. Borrowers who are struggling to meet mortgage payment obligations should contact their lender immediately to discuss available options.

Individuals in need of housing counseling should visit the Department of Housing and Urban Development (HUD) website at HUD.gov. HUD housing counselors can help borrowers determine which home saving option is best suited for their needs.

Author Bio: Real estate investor and author, Simon Volkov, specializes in providing information and resources pertaining to mortgage forbearance, refinancing mortgages, loan modifications and foreclosure prevention alternatives. Learn more by visiting www.SimonVolkov.com.

Category: Real Estate
Keywords: mortgage forbearance, mortgage forbearance plan, mortgage loan forbearance, mortgage refinance