Most mortgage lenders will initially try to entice borrowers with a “forbearance agreement.” This type of arrangement calls for the borrower to “catch up” the back payments, fees, and interest over a very short period of time (usually three to twelve months). The result is a much higher monthly mortgage payment. Additionally, lenders usually ask for a large lump sum up front to initiate a forbearance agreement.
Forbearance Does Not Stop Foreclosure
A forbearance agreement with the mortgage lender’s loss mitigation department usually does not take the borrower out of foreclosure. Forbearance simply causes the bank to “postpone” or “continue” the foreclosure sale until the payments are completely caught up. If the borrower does not comply with the exact terms of the forbearance agreement (a few days late, a few dollars short), the foreclosure sale takes place immediately (often within days).
A Word of Caution
Forbearance agreements are essentially a way for mortgage lenders to squeeze more money out of a borrower. Due to the loose California foreclosure laws, lenders often disguise a last grab at the borrowers money as a “workout plan” for the loan, knowing they will be foreclosing on the property anyway. Forbearance agreements are stacked against the borrower and almost always result in foreclosure.
Most borrowers would be better off with just about any type of arrangement, other than a forbearance agreement. In rare cases, the lender may offer an affordable forbearance agreement, but it quite uncommon. Many of the California bankruptcy cases filed by this office are the result of borrowers entering into forbearance agreements with mortgage lenders without understanding the implications.
Get The Help You Need
If you are considering entering into a forbearance agreement, the proper legal advice is crucial. We thoroughly understand the ins and outs of forbearance agreements, and what the benefits and disadvantages are. Contact us for a free consultation to determine what the best strategy is for you.