Mortgage Forbearance 101
A mortgage forbearance is when your mortgage servicer or your lender allows you to stop or reduce your mortgage payments for a limited period of time. Your mortgage servicer is the company to which you send your mortgage payments.
A mortgage forbearance provides temporary relief by letting you make reduced monthly payments or no payments. The forbearance lasts for about 3 months to one year depending upon the type of mortgage you have.
It is important to understand that a mortgage forbearance does not mean that the amount you owe is reduced or forgiven. You still owe the amount of the missed or reduced payments.
Possible Options
About a month before your forbearance ends, your mortgage servicer should contact you to discuss your situation and the various options that may be available to you. If you are not contacted then you must contact the servicer to make arrangements.
The available options depend upon various factors including your financial situation and whether or not you loan is government backed such as FHA, Fannie Mae and Freddie Mac. Not all options will be available for all borrowers.
These are some of the options that may be available:
- Reinstatement
A reinstatement is when you pay all of your missed payments back in one lump sum. You must be allowed to do this at the end of your forbearance. Upon reinstatement you resume making regular payments in the same amount you that you paid before the forbearance. There are other options that do not require full payment to be made.
- Repayment
A repayment plan is when you bring your mortgage current over a period of time. This is done by adding an additional fixed amount to each of your regular monthly mortgage payments.
This generally can be done over a period of 6 to 12 months. The number of repayment installments may be negotiable and can partly depend upon your ability to pay.
- Payment Deferral
A payment deferral is when you resume your regular mortgage payments and the missed or reduced payments are due at the end of the mortgage loan in a lump sum or by extending the length of the mortgage for the number of months of the forbearance. It will be due earlier if you sell or refinance the property.
- Mortgage Modification
A loan modification permanently changes the terms of your original mortgage loan. Some of the loan terms that may be changed include the interest rate or the loan term. If you get a loan modification, you’ll be required to complete a trial period plan where you’ll need to make trial payments on-time each month for a few months to ensure you can afford the new modified payment.
Any amount that you did not pay during the forbearance is added into the total that you owe under the modification.
- Chapter 13 Bankruptcy
For homeowners who do not qualify for available programs or find the options unacceptable, a Chapter 13 bankruptcy remains an option to cure the missed payments over a period of 3 to 5 years.
We Can Help You Save Your Home
If you are unable to make your mortgage payments after a forbearance, contact us immediately. We can discuss your options for saving your home. At Levitt & Slafkes, P.C., we have decades of experience in helping to keep families in their home. Let us assist you. Contact us at (973) 323-2953, or contact us online to schedule an appointment.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.