The first step to qualifying for any forbearance is to speak with your mortgage servicer. Your servicer is who you make your mortgage payment to each month. It could be your original lender, but that’s not always the case. Your servicer will ask you to share some information about your situation including the nature of your hardship as well as your expenses.
The two terms sound similar so we also want to take a moment to talk about the difference between forbearance and foreclosure. While forbearance is a pause or reduction in your mortgage payment, foreclosure refers to the right of your lender take back your home because you defaulted on the mortgage. Forbearance is meant to help you avoid foreclosure.
Your servicer has to agree to put you on a forbearance, so it’s important to communicate with them openly about the nature of your payment problems. If you’re approved, your servicer will require periodic check-ins and the length of your forbearance may be extended. Once the forbearance is over, your servicer will attempt to qualify you for repayment options.
While this is a high-level overview of the process, the following sections will go over more specifics.
Mortgage Forbearance Eligibility
When it comes to eligibility, you’ll have to show evidence of a hardship. This could be something like a job loss or bills for an unanticipated medical treatment. Forbearances may also be issued after natural disasters and other events affecting broad swaths of the population in an area. However, it’s important to know your lender has to approve this.
Mortgage Forbearance Length
The actual length of the forbearance is often going to depend on the nature of your hardship. Your servicer will approve an initial forbearance and subsequent extensions on a case-by-case basis. While there’s no end date that applies in every situation, most last less than a year. It’s also important to remember that the longer your forbearance continues, the more you’ll need to pay back.
Mortgage Forbearance Payment Options
Once your forbearance ends, it’s time to resume making payments. Your past-due payment can be handled in one of several ways.
The Full Amount Is Paid After Forbearance Ends
The fastest way to become current on your mortgage is to pay the full amount when the forbearance ends. This is referred to as reinstatement. It won’t work for everyone, but this could be an option for you if you’ve been working without a paycheck for a while and your employer comes through with promised back pay. You might also be reimbursed for medical bills.
The Full Amount Is Paid During The Rest Of The Mortgage Term
If you don’t end up paying it off at the end of the forbearance itself, there are a couple of options for your past-due payments to be paid off during your loan term:
Repayment plan: The past-due amount is added to your monthly payment in increments to pay off payments that would have been due during your forbearance. Repayment plans are typically short-term in nature, often lasting 3 – 6 months.
Loan modification: In a loan modification, the terms of your loan are modified to add the past-due payments back into your loan balance. Both the interest rate as well as the term of your loan are subject to change. If you’re wondering about the difference between a loan modification and refinance, a loan modification changes the terms of an existing loan. A refinance is a new one altogether.
The Full Amount Is Paid At The End Of The Mortgage Term
In some instances, you may qualify for a deferral or partial claim. You resume making your regular payment after forbearance. Payments missed during forbearance are due when you sell the home, refinance or when your loan matures.
Staying In The Home Isn’t Feasible
If you and your servicer have gone over the options and you either don’t qualify or it doesn’t make financial sense for you to stay in your home, there are options you can discuss with your servicer that don’t amount to a full foreclosure:
Sell your home: If you can’t stay in your home, this is the best possible outcome because there’s no negative credit impact. After paying off the mortgage, you can take whatever is left over and use it toward finding your next living arrangement more in line with your current budget.
Short sale: If property values have fallen enough that you cannot sell your home for enough to pay off the mortgage, your servicer may agree to help facilitate a short sale. In a short sale, your servicer has to accept all bids and has final approval over the winning offer. In exchange for you keeping the home in sellable condition, your servicer may agree to give you some money toward finding another place.
Deed-in-lieu of foreclosure: In a deed-in-lieu, you voluntarily hand the property over to your servicer. If your servicer agrees, you would be given a move out date. This is another case where your servicer may be able to give you some consideration for maintaining the condition of your home.
Forbearance is a process that can help if you're struggling to pay your mortgage. Your servicer or lender arranges for you to temporarily pause mortgage payments or make smaller payments. You still owe the full amount, and you pay back the difference later. Forbearance can help you deal with a financial hardship.
Some of the disadvantages of forbearance include: In many forbearance scenarios, interest will continue to accrue on the loan during the forbearance period, which means that the borrower will end up owing more money when they eventually have to start making payments again.
Options for repaying your paused or reduced payments
How it works: With a deferral or partial claim, your missed payments move to the end of your loan, or the amount is put into a subordinate lien that you pay back only when you refinance, sell, or terminate your mortgage.
If you're still in your initial forbearance mortgage period, you can ask your servicer for an extension. Some servicers will extend forbearance for as long as 12 months, or in some cases, even longer. You'll need to speak to the servicer to get approval for a second or extended forbearance period.
How long does mortgage forbearance last? Mortgage forbearance is intended to provide relief while you're dealing with a short-term financial problem, so it generally does not last more than one year. Some lenders will ask you to provide them with updates during the forbearance period.
For loans made under all three programs, a general forbearance may be granted for no more than 12 months at a time. If you're still experiencing a hardship when your current forbearance expires, you may request another general forbearance. However, there is a cumulative limit on general forbearances of three years.
Unless your loan servicer specifies otherwise, they will report your mortgage forbearance to the credit bureaus, which can lower your credit score because it shows a period when you weren't making mortgage payments.
Student loan deferment and forbearance can both postpone your payments, offering immediate financial relief without jeopardizing your account. Deferment also typically pauses your interest, making it a better choice than forbearance.
California law conforms, with modifications, to federal mortgage forgiveness debt relief for discharges that occurred in tax years 2007 through December 31, 2012.
Under the new law, forbearance shall be granted for up to180 days at your request, and shall be extended for an additional 180 days at your request. Remember to make the second 180-day request before the end of the first forbearance period.
A repayment holiday can pause your principal and interest repayments for a period of time. Repayment holiday policies vary lender to lender, Eg. Some lenders may grant a repayment holiday for three months, with an option to review and extend to six months.
Forbearance is a temporary postponement of loan payments granted by a lender instead of forcing the borrower into foreclosure or default. The terms of a forbearance agreement are negotiated between the borrower and the lender.
Your deferred PITI mortgage payments will have to be paid back eventually. If an escrow burdens you with taxes and insurance, your servicer will continue to pay them during the forbearance period.
If your mortgage is federally backed, you may be eligible for forbearance, which typically allows you to postpone payments for up to a year, and 18 months in some cases. 8 There are also additional options for mortgage relief, such as your state's Homeowner's Assistance Fund program.
Loan forbearance can impact your credit depending on how lenders report relief payments to credit bureaus. If payments are reported as delinquent, forbearance may harm your credit. However, many types of forbearance shouldn't hurt your credit.
Mortgage payments are typically suspended for three to six months, but the time could be longer or shorter depending on your financial situation. When the forbearance period ends, there are a few ways borrowers can repay the missed amount, one of which includes deferment.
A home loan repayment holiday is exactly what it sounds like: taking a break from making repayments on your home loan. You will need to arrange this with your lender, who may allow for a period of up to 12 months.
Introduction: My name is Dan Stracke, I am a homely, gleaming, glamorous, inquisitive, homely, gorgeous, light person who loves writing and wants to share my knowledge and understanding with you.
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