Repayment of home loans can be difficult at times because of the unexpected and unavoidable expenses. However, there is an option for borrowers who are having a hard time paying for their home loan, i.e., mortgage forbearance. Forbearance agreements provide homeowners with additional time to cure mortgage arrears by paying extra money every month. If a borrower wants to enter into such an agreement, then he/she will have to allow a bank to perform a financial audit to ensure that the borrower can afford loan payments in the future.
As a borrower enters the mortgage forbearance agreement, it won’t be possible for the lender to initiate foreclosure unless the borrower defaults on the contract. If you are a borrower who wants to obtain a mortgage deferment plan, you will have to work with the lender’s loss mitigation department. In the majority of cases, borrowers will have to submit all the necessary financial documents along with a forbearance letter of hardship in which it is explained why they need an extension for paying their mortgage.
A bank employee will be assigned to the borrowers who will mediate between the homeowners and the bank. That person will also remain with the borrowers throughout the forbearance term. The role of that bank employee is not to take the final decision regarding home loan deferments, but to review the payment history of borrowers, financial records and make recommendations to bank management.
Forbearance plans are very different from loan modifications or mortgage refinance, so make sure you don’t confuse these terms. While it is possible to prevent foreclosure with each type of transaction, the method is entirely different. Where forbearance plans temporarily change the loan terms, refinanced mortgages and loan modifications on the other hand alter the mortgage terms permanently.
The time of forbearance mortgage loan agreement is between 3 and 6 months. Some banks also ask debtors to pay a partial down payment and extend the past due balance throughout the forbearance plan. People borrowing money from mortgage lenders other than banks can extend payments without paying a down payment. It is better to contact the lender to know the exact type of agreement.
Homeowners can cure past due payments by paying their monthly payments along with additional funds. The loss mitigator will provide all the details of the forbearance agreement and the required payment plan. The terms will include the length of the plan, accrued interest, payment dates, monthly forbearance payment amount, and total mortgage arrear amount. Then, the homeowners will have to sign the contract upon agreement followed by notarizing the document.
If the homeowners default on mortgage forbearance plans, the lenders will initiate foreclosure. Debtors need to check all the advantages and disadvantages of forbearance plans before finalizing anything, as in a case of payment default, they will have to relinquish the hold to their house.
Mortgage refinance is another option of mortgage forbearance, which allows homeowners to apply for a new loan to pay off the existing one. But, before they can do so, reviewing the current loan is important because there could be prepayment penalties to pay. Banks too may charge closing costs for refinancing. These expenses will have to be paid by the homeowners. However, some lenders will add these fees into the new loan.
To know more about the mortgage forbearance, you should consult PIF Lending because only an expert financial advisor can help you know the exact plan, its benefits, and drawbacks.