Forbearance
A forbearance is when you catch up all your back payments and continue paying your original mortgage payment. This is a good option for many. However, it doesn’t reduce your payment as much as a loan modification does.
Most lenders are glad to negotiate. The one advantage is that the process is much shorter. You avoid the lengthy and troublesome loan modification process. A forbearance can normally be approved in two weeks to a month. Contrast this with the one to six-month process associated with loan modifications.
The big drawback is that it doesn’t reduce your payments. In fact, the first 12 months are tough. Here is why. You are re-paying the back payments during those 12 months. This means your monthly payment actually increases. If you were paying $800 a month before, you are paying $1,150 during the forbearance.
Many homeowners accept a forbearance only to default because they can’t afford the higher payments. A short sale or a good loan modification is what they really need. However, the lender will be reluctant to approve it. Why? Because they already defaulted on the forbearance.
This is why we recommend you only ask for it if you can afford the higher payment. Was the original reason you defaulted because you could not afford the payment? In this case, a loan modification or short sale is a better option.
Ask us for your detailed analyses, on whether a forbearance is a good option for your situation. Contact us today for a free consultation. Remember we are here to help.
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