Facing temporary money problems can lead homeowners to miss mortgage payments and eventually get behind on their mortgage. Situations such as illness, unemployment or natural disasters can all be temporary problems that can cause a homeowner to miss mortgage payments. If the situation is truly temporary, finding a temporary way to address the missed mortgage payments can help the homeowner avoid foreclosure.
There are many different loan modification processes that allow homeowners to avoid foreclosure by changing the terms of their loans to better accommodate their changed financial circumstances. Most of these methods are permanent in nature, reducing the homeowner’s payments for the remaining life of the loan. For a homeowner who is facing financial problems that may last for an indefinite period of time, permanent loan modification options may be more beneficial. However, homeowners facing temporary problems may benefit from short term solutions such as forbearance.
Forbearance is a short term offer from a mortgage lender that suspends or reduces a homeowner’s mortgage payments for a period of time, generally up to six months, and later allows the homeowner to return to their old payments when the forbearance period is up. For Federal Housing Administration (FHA) borrowers, the forbearance period can be up to twelve months through the FHA Special Forbearance program. Forbearance can also reduce the monthly amounts required for taxes and insurance if these are paid through escrow along with the mortgage payments. At the end of the forbearance period, the homeowner is required to catch up on the amount of the payments that are not paid during the forbearance, either through payments or through one lump sum payment at the end of the forbearance. During the forbearance period, the mortgage lender agrees not to begin foreclosure proceedings.
This option is an advantage only if the homeowner’s financial problems are temporary and the homeowner is sure to bounce back after a short period of time. If the homeowner is not sure that their situation is temporary, or their inability to pay is because of a problem with the original loan such as an adjustable interest rate, then forbearance might not be a good approach. This is because forbearance only delays the inevitable foreclosure process, and may even benefit the mortgage lender by giving the mortgage lender more time to cure any defects they may have in pursuing foreclosure, such as documentation issues. In some cases, it is better to try and negotiate more permanent modifications that would allow the homeowner to stay in their home or sell it at a slight loss and avoid foreclosure at the same time.
Before negotiating or signing a loan forbearance agreement with a mortgage lender, a homeowner should consult an attorney to ensure that the terms included are beneficial and would not place them in a worse situation after the forbearance period ends.
Contact An Experienced Foreclosure Defense Attorney
If you are facing foreclosure, or going through some temporary financial problems that threaten to lead to foreclosure, it is important to seek an experienced foreclosure defense attorney to protect your interests and advise you of your options. Contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for a consultation on your case.