06
Forbearance Agreement
Forbearance Agreement is made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise the right to foreclose on a mortgage – in another word forbears from filing a foreclosure action, or suing on a note, or the like – and the borrower agrees to a mortgage plan that will, over a certain period of time, bring the loan current. Interest that accrues during the forbearance remains the debtor’s responsibility. When the forbearance expires, the unpaid interest is added to the principal balance of the loan.
Forbearance agreement allows restructuring of financial terms to make them more manageable for the borrower, while still providing an acceptable rate of return to the lender.
A forbearance agreement is a short term solution – it is designed for borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment. Borrowers with more fundamental financial problems – like having an adjustable rate mortgage – must look for other remedies.
Forbearance Agreement establishes the rules by which the lending relationship will operate during troubled times, giving both parties some breathing room as they work to identify problems and solutions. You could request this type of payment plan from your lender’s Loss Mitigation department. If you qualify for it, you may be allowed to postpone monthly mortgage payments for a minimum of four months and at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly payments.
