| We often get the question "Can you stop a | | | | reasons. |
| foreclosure with a forbearance agreement?" The | | | | Contact your lender and ask for the direct |
| answer is not a simple "yes" or "no" because it | | | | number of the person dealing with your file. Ask |
| depends on the homeowner's situation. | | | | for a homeowner's assistance package. Document |
| A forbearance agreement is a contract with | | | | everything you do and what is said and when. |
| conditions agreed upon between the lender and | | | | Review the package carefully. It is important to |
| the delinquent borrower. The lender agrees not to | | | | consult an attorney to help with the terms of the |
| immediately foreclose on the property while the | | | | agreement so that your interests are defended. |
| borrower agrees to bring the loan current over an | | | | Do not abandon the property if you are |
| agreed upon amount of time. It provides for | | | | considering this forbearance option. Make sure you |
| more time to repay the debt. This works well for | | | | have written documentation of the agreement |
| those in temporary problems that have a | | | | made with your lender or it will not stop the |
| foreseeable conclusion, but it is not for those with | | | | foreclosure from happening. |
| long term financial problems. It does not work well | | | | There are no set terms for a forbearance |
| for those who are in crisis due to an adjustable | | | | agreement. It is ultimately what you and your |
| rate mortgage. In that case, the loan needs to be | | | | lender negotiate. However, there are some typical |
| restructured or modified by switching to a fixed | | | | inclusions. Mortgage payments are reduced initially |
| rate or changing the loan's length or interest rate. | | | | (less than 6 months), then the increased payment |
| Before considering a forbearance agreement, | | | | schedule begins (usually not lasting longer than a |
| make sure you honestly evaluate where you are | | | | year). The agreement will give an established finish |
| financially and that you can afford the increased | | | | date. It will usually state that the lender has the |
| payment terms. If foreclosure is indeed inevitable, | | | | right to foreclosure upon you and that you have |
| any money you have given the lender will be lost. | | | | no defensible way to stop it. It includes the debt |
| Before contacting your lender, you must | | | | amount and sometimes conditions such as the |
| document your financial trouble for the lender by | | | | borrower agreeing to financial counseling or selling |
| writing what is called a hardship letter. It will | | | | off certain assets. The new payments typically |
| explain what financial trouble you are having, when | | | | include higher interest rates and a good faith fee |
| it started, and offer proof as to why it is | | | | to be paid prior to the agreement starting |
| temporary. It is up to you to prove your case | | | | (generally.25 to 2% of the balance of the loan). |
| otherwise the lender will assume your money | | | | The agreement falls apart if the borrower |
| trouble is long term. Also, estimate the equity in | | | | abandons the property outright or fails to make |
| your home. With a great deal of equity, you | | | | the payments or meet the stated conditions for |
| might want to consider other options such as | | | | 60 consecutive days. The lender then has 90 |
| selling your home. However, if you have very little | | | | days from that period of time to start |
| equity, it is usually an incentive for the lender to | | | | foreclosure proceedings. Be aware though that a |
| make arrangements with you to be able to stay | | | | forbearance agreement can be reviewed and |
| in the home. Foreclosure would be costly for | | | | renegotiated if your circumstances change, but |
| them in that case. This is contingent though that | | | | the loan must not be more than 12 months |
| your financial woes are due to involuntary | | | | delinquent. |