Falling behind on your mortgage payments puts you in a dangerous situation. Although most lenders wait a minimum of 90 days before starting the foreclosure process, each lender's policies vary. Your lender has the right to initiate a foreclosure as soon as your grace period expires. Unpaid mortgage fees add up, and the longer you go without paying the arrears, the harder it is to get caught up. If you're facing an imminent mortgage default, mortgage forbearance could be the break you need to catch up on your payments and avoid foreclosure.
During a mortgage forbearance, your lender temporarily suspends or reduces your mortgage payments. You must demonstrate to your lender that you are suffering from a legitimate hardship that makes it impossible to keep up with your payments. After the forbearance period is over, you must resume paying your previous mortgage payments in addition to repaying any mortgage arrears, insurance and fees that you left unpaid during the forbearance. Your lender may either require a lump sum payment or allow you to make partial payments until you bring the loan current.
Mortgage forbearance isn't an option for everyone. Before placing your loan into forbearance, your lender wants assurance that your financial hardship is only temporary. For example, if your income suffered as the result of an illness or you had to take unpaid leave at your job, you may be a candidate for forbearance. If, however, you had an adjustable rate mortgage that adjusted beyond your ability to pay, your hardship is not temporary and you are not a good candidate for mortgage forbearance.
Other eligibility requirements differ depending on your lender. Bank of America, for example, will only approve your forbearance request if you have never paid your mortgage late. Other lenders may award you a forbearance after you've already fallen behind on your loan.
The length of time your forbearance lasts will differ depending on your lender. Whereas some lenders expect you to repay your mortgage arrears after 90 days, others give you more time to get your finances in order before the forbearance ends. For example, if your loan is secured through mortgage guarantors Freddie Mac or Fannie Mae, your lender can provide you with a six-month forbearance without obtaining advance permission from your loan servicer. Should you need additional time, your lender may file a request with the loan servicer to extend your forbearance for another six months.
If a temporary reduction in your mortgage payments isn't enough to help you get back on your feet or you don't qualify for forbearance, consider applying for a loan modification. After a temporary trial period in which you must demonstrate to the lender that you can afford the modified payment, the lender will permanently restructure your loan to better fit your budget. Although your lender will still expect you to catch up on any previous payments you missed, lenders generally waive any outstanding late fees you owe after modifying the loan.
- Bankrate: Missed Mortgage Payment? Catch up Pronto
- Bankrate: Try Forbearance to Fix Late Mortgage
- Bank of America: Forbearance
- L.A. Times: Fannie Mae and Freddie Mac Revise Policies on Mortgage Forbearance
- U.S. Department of Housing and Urban Development: Loan Modification -- Frequently Asked Questions
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.