A number of circumstances may lead a homeowner to seek to pause a mortgage. Situations such as loss of employment or emergency medical care can make keeping up with mortgage payments difficult. A homeowner may be making multiple monthly mortgage payments to a first mortgage and a home equity loan. To prevent foreclosure, a homeowner may need to suspend payment on one or all of the loans. Asking the lender for a forbearance can temporarily pause your required payments.
Collect all financial information. You must prove financial hardship to the lender. Statements from your mortgage, car loans, student loans, credit cards and other expenses will be needed to demonstrate your monthly obligations, You’ll also need income statements such as pay stubs and tax returns.
Write a hardship letter to explain your current situation. This is the time to explain the conditions regarding your missed payments or difficulty keeping up with payments each month. Let your lender know whether this is short-term or long-term issue. Also discuss with the lender how you will address this problem. The lender must have confidence that at the conclusion of the forbearance period you can continue with your monthly payments.
Negotiate the terms of the forbearance agreement. The start and end dates of the forbearance period should be clear between both parties. This is generally no more than 12 months. The agreement should outline responsibilities of the lender and borrower during the forbearance period and at its conclusion. Typically, during the forbearance period, the borrower’s obligation to make payments will be suspended; however, he will still be responsible for delinquent payments, payments that fall during the forbearance period, and all interest that has accrued.
Review the agreement carefully. Be sure to note the interest rate and payment calculation. Review the payment schedule for delinquent payments. Know whether you must pay a lump sum or the payments will be spread over the length of the mortgage. Also note any penalties that may occur if payments fall behind again. Lenders will sometimes include provisions for an accelerated foreclosure process.
Sign the agreement once all parties agree on terms of the forbearance. Sign the contract and begin the steps to get current on the mortgage and make regular payments in the future.
- Guide to Negotiating a Forbearance Agreement with Your Lender
- Restructuring Options: The Forbearance Agreement
- Governor Andrew M. Cuomo. "Governor Cuomo Signs Executive Order Mandating Businesses That Require In-Office Personnel to Decrease In-Office Workforce by 75 Percent." Accessed Aug. 8, 2020.
- Fannie Mae. "Fannie Mae Assistance Options for Homeowners Impacted by COVID-19." Accessed Aug. 8, 2020.
- FHFA. "FHFA Extends Foreclosure and Eviction Moratorium." Accessed Aug. 8, 2020.
- Freddie Mac. "Freddie Mac Announces Enhanced Relief for Borrowers Impacted by COVID-19." Accessed Aug. 8, 2020.
Based in Washington, D.C., Jeremy Watson is an engineer and urban planner. He has been involved with urban design, city infrastructure and business since 2008. Watson holds a Bachelor of Science in civil engineering from the University Florida, as well as a Master of Science in urban and regional planning from Virginia Tech.