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Avoiding Foreclosure through Forbearance

[b:04c0ef9dfb]Forbearance[/b:04c0ef9dfb] is a temporary agreement under which a mortgage lender can either reduce or suspend monthly installments paid by the borrower. Usually forbearance continues for a period of less than 6 months, but it can last for some more time depending upon the lender.

Through forbearance on mortgage, borrowers get the chance to avoid [b:04c0ef9dfb]foreclosure[/b:04c0ef9dfb] - a legal process by which the lender can sell off the property and recover the outstanding loan balance.

But forbearance is not allowed to each and every borrower. Generally, those having recently lost their sources of income and going through financial problems are allowed to go through forbearance. Lenders consider such an approach only if the borrower can convince them that the problem is temporary. The borrower should also have relevant proofs stating that he is capable of qualifying for the reduced payment plan.

At the end of the forbearance agreement, the borrower has to make regular payments along with an extra amount that will make up for the loss on account of non-payment or reduced payments. Usually the repayment period does not exceed a year.

Forbearance does not imply that the lender has forgiven the debt; rather it allows a borrower to get along with the loan payments that he owes within a later date.

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What are good terms to accept a forbearance agreement?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi kathie,

Welcome to forums.

I've already replied to your query at http://www.mortgagefit.com/loantalk/forbearance.html . Please have a look at it.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I'm currently unemployed and am considering Forbearance initially for 4 months with 0 payments. At the end of the 4 months and I have a job, will my house payment be higher than the original amount - which I don't think I can't afford, or will the bank modify the loan so I can afford it?

Thank you,

Cathy

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Cathy,

After the forbearance period is over, you payments will definitely increase. In my opinion, you should apply for a loan modification right now if you are delinquent on your payments.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Is it true that the payments you are making under the forbearance agreement do not get applied to your mortgage? That Forbearance is only a way to "hold them back from filing foreclosure" but that the original owed amount is tacked on to the end of the mortage?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Katherine!

Welcome to forums!

In a forbearance, the lender either reduces or suspends the payments for few months. The reduced balance that you pay to the lender goes towards your mortgage. Once the forbearance period is over, you will have to pay certain extra amount along with your regular payments in order to bring your mortgage current.

Feel free to ask if you have further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Does mortgage forbearance negatively affect your credit?

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Notary,

A forbearance allows you the opportunity to prevent the loan from being reported as delinquent and catch up with the loan payments. Thus, it actually helps you to avoid negative items on your credit report. When your lender agrees to do a forbearance, they do not generally report it as a negative item which is why it does not affect your credit negatively.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello. I am currently in a 3 month forbearance and they say that they are going to try and leave the payments the same. Not sure for how long, but I would like for it to be long enough to sell the house. So my question is...I have paperwork to fill out about finances(I can't remember what I first reported). So I know after reporting eveything it will show that we should have a little extra money. For them to approve the payments to remain the same is it ok to show extra income or to show it as that we have no extra?

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Jamie,

The lender will approve the forbearance if they are convinced that your various sources of future income will help you be current on the loan or assist you in qualifying for a repayment plan or a loan modification at the end of the forbearance period. Thus, I believe you need to show a little bit of extra income so the lender knows that you will catch up with the payments once the forbearance period is over. But you should also not show too much of extra income as the lender can reject the forbearance thinking you can afford your current monthly payments.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am currently on a forebearance contract until August. At the end of my forbearance, am I required to pay for the the three months that I am delinquent plus resume my monthly mortgage?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

my wife lost her job a little over a year ago, im disabled and receive workers comp and soc sec and we are almost 3 months behind on our mortage payment and we are doing a loan modification now. do we still try to make some kind of payment or will they let us do a forbearance so we can lower it for right now

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sunnyca2009's picture
sunnyca2009 | Joined: August 4, 2009 07:15 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

If you want to protect your credit report you want to make payment on time

Also its a good idea to to check with the lender and see what they are expectign during this time

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello, I have been approved for forbearance, and my Mortgage company has me scheduled to pay the next 2 month at normal payment, then it jumps up almost 300 dollars extra a month until Oct. of 2010, this would put my family in a worse situation than before and I am quite concerned. Any advice as to if this is usual? From reading other sites I was under the impression that this would help me... thanks in advance

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Here's the joke. My wife and I both have FICO scores over 850. Never been late on a payment on anything in 30 years. Had two slow years of work, burned through my savings on the house. The cheapest we could find in the market 5 years ago. First house. All lenders said no worries, rates will be great for years to [url=http://www.mortgagefit.com/refinance.html]refinance[/url]. The year I got in I made over $160,000. Close to $200,000 combined. Combined both my wife and I make over 70,000 normally. Never went to Hawaii, all cars paid off, no cable TV. Need a bit of help and none of our creditors will even so much as let me skip one month payment to catch bills up. Joke is many of our friends who have been footing the bill for this country for 30 years are all scrambling for apartments. Well, I guess at least that way we'll have more in our pocket to keep bailing out the banks. We're walking from it all. Not worth the headaches. Quality of life is more important than a crappy house. The great American nightmare. Unless you are super wealthy or have help. Do the Deed in lieu. Short sale is nightmare.

P.S. Out of all of our friends who have done short sales, Deed in Lieu, begged for (or paid) to get a modification and gone into foreclosure not one of them or myself has had the bank come back and say, ‘Hey don’t move. We’ll help you with a modification.’ Do you see any posts here referencing that? We have been trying to get a modification for 9 months. They string you along saying hey you forgot to check this box or dot that ‘i’ so they can squeeze every last cent out of you before the ship finally sinks. Do yourself a favor; find a nice apartment while your credit is still intact if it is and take care of your survival first because no one will be there to help when you are out on the street and homeless.

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Ricky,

I can understand that you're going through a tough time. If you want to get rid of the property, then I would suggest you to write a hardship letter to your lender and apply for a deed in lieu of foreclosure. Though it will lower your credit score by 250 points, you won't be responsible for the deficient amount resulting from the sale of the property. However, you should also note that after a deed in lieu, you will not be able to qualify for a loan immediately. You'll have to wait for the 3-4 years in order to get a loan.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello,
I went through a forebearance period last year for about 7-8 months and then at the end of it they wanted all those payments at once. While the forebearance was going on I was working on a loan modification. I never got refused or approved. Anyway my home went into foreclosure and got down to two weeks before the sell date and I borrowed all that back money from a relative and reinstated the loan. If I had known they wanted all of it at the end like that I would have never done that. I almost lost my home.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I just want to give a little advice about that it does hurt your credit report because you are not paying the full amount that is due and it happened to me. I had lost a lot of credit cards and also the limits on them went down because of my credit report showing that I wasn't paying my mortgage, even though I was but not the full amount. In the agreement it stated in Quotes that it would say that the mortgage was being paid but not in full so it would hurt my credit but that was a lie.

I hope it doesn't happen to you like it did me. Now I am trying to modify my home equity with Chase and they are ridiculous.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

the bank offers to charge lower rate for a year , and I will reduce principal too. I agree.
they demand to sign a forbearnce agreement? is it in my benefit? ( insured me from the bank filing ) what are the negative sides of signing? do I actually consent a default in some way?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome joea,

Unless you sign the agreement, they may not lower the interest or reduce the principal. So, it is in your best interest to sign the agreement. This agreement will mention the terms and conditions of the contract.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My Freddy Mac loan servicer offered me several mortgage forbearance terms, and then demanded full payment of the (9 month arrears). They also reported to the three credit reporting agencies that we were in arrears while we were in the forbearance period. Apparently, the work-out department works indepently of the foreclosure department, and both process were in the works, concurrently. We stopped the foreclosure and obtained a modification after hiring an attorney, but our credit has been destroyed by this process. The final outcome was that the bank tacked our arrears on to the end of our principal amount, increasing our monthly payment by $250! We can now no longer qualify for a loan.

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi maryann,

The late payments are normally added back to the principal amount which increases the payments when the repayment option is given at the time of loan modification. If you can't afford the payments, you can think of selling off the property in order to get rid of it. You can go for the option of deed in lieu of foreclosure to get rid of the property.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Will forbearance stop forclosure and how do I qualify??[/b]

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi RDC,

A forbearance will help you in stopping a foreclosure. You should contact your lender and apply for a forbearance. You will have to write a hardship letter for the same. You should get in touch your with lender and he will let you know the complete process in details.

Thanks

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