Understanding Forbearance Agreements and Their Impact on Your Mortgage

Financial specialists like Stephen Buzzi often come across people who believe a forbearance agreement and a mortgage modification to be one of the same thing. However, this isn’t entirely true. Essentially, when someone enters into a forbearance agreement, they can miss a monthly payment, or pay less towards their monthly payments, for a period of time agreed with their lender. The penalties and unpaid interests are then added to the loan principal. By allowing this, a mortgage provider enables a homeowner to recover from a financial difficulty. To be accepted, most will require to complete a forbearance form, which can be quite tricky to do.

The Forbearance Form

Different lenders have different forbearance agreements. Sometimes, they will require the homeowner to make payments on top of their normal monthly payment in order to recover the missed ones, once they return to normal payments. Others allow people to simply stop paying for a set period of time, and the money and interest that is missed is added to the principal. Once normal mortgage payments resume, the normal terms and conditions of the mortgage agreement also resume.

During a forbearance agreement, the lender agrees to stop trying to collect money for that set period of time. They will also not be able to take out any foreclosure action. Unsurprisingly, these agreements are only in place for as short period of time.

It is very important that the form is filled in exactly to the requirements of the lender. Lenders do not like to agree to a forbearance, because it means the homeowner is experiencing financial difficulties. They will want to see that these difficulties are of a temporary nature, and they usually only allow them for people have had their mortgage payments up to date until that point. The reason why they will agree to them, is because foreclosure is a lengthy and expensive process, and one in which the lender stands to lose a lot of money.

When filling in the form, it is important that you are completely open and honest about your situation, and that you fill in the form in great detail. It is recommended to speak to someone like Stephen R Buzzi about the situation you find yourself in, as they can recommend the things that you should include in your form. Often, there is a space for personal comments, which is particularly important to fill in properly, as that is your opportunity to convince your lender that you fully intend to return to making normal mortgage payments as soon as your situation has resolved itself.

Unfortunately, financial difficulties can happen to the best of us, and mortgage lenders are aware of that. Their goal, ultimately, is to make money, and they know they stand a better chance of achieving that by allowing a forbearance for a period of time, so long as the homeowner is normally of good financial standing. This is why, as with all financial difficulties, it is vital that you take action straight away, without delay.