From a real estate perspective, a forbearance agreement is an arrangement which restrains mortgage lenders from foreclosing your house. The agreements give mortgage lenders an obligation to tolerate borrowers who have temporary financial problems. This in turn gives mortgage holders more time to meet their mortgage obligations. Forbearance agreements usually come into play when mortgage holders (that means you, the homeowner) have financial problems but want to avoid foreclosure.
The agreement gives homeowner time to get their finances in order, negotiate for new repayment plans, negotiate for loan modifications, or find a buyer for the house. It is important to note that forbearance agreements became mandatory under the Obama administration. They are mandatory provided homeowners met certain qualifications i.e. you must owe less than $729,750. Your home loan must also originate before 1st January 2009. You also need to ask for forbearance. It’s not offered automatically.
How Do Forbearance Agreements Help?
Having discussed forbearance agreements in brief, let’s now shift our focus to how a forbearance agreement can help you save your house.
- It makes sure you don’t give up without a fight: Financial problems render very many people helpless for obvious reasons i.e. you can’t afford an attorney to represent you, you are at the mercy of others etc. Forbearance agreements give mortgage home owners hope as opposed to sitting back and watching the worst happen.
- It offer a solution to temporary financial setbacks: Some of the most common causes of mortgage defaults include; job loss, payment cuts and interest rate increases. When a mortgage borrower faces any of the above problems, they may be forced to default on their mortgage. It is however important to note that such problems are temporary.
- It buys you time! Time to get another job soon or find other alternative sources of income. Forbearance agreements allow you time to find solutions to temporary financial setbacks that can be easily solved without taking extreme measures like foreclosure.
The agreements are an act of good faith from your mortgage lender that you will soon get back on your feet.
If you are interested in getting a forebearance agreement but dont know where to start, contact us below and a distressed real estate expert will be able to guide you through the process.