If you’re worried about meeting your upcoming mortgage payment, you could explore the option of a forbearance agreement with your lender. This arrangement can assist in sidestepping late fees, defaulting, or facing foreclosure. However, to secure a typical mortgage forbearance agreement, you’ll need to provide evidence of your financial hardship.

What is a forbearance agreement?

A mortgage forbearance agreement serves as a temporary relief plan between you and your lender, allowing for a reduction or pause in your mortgage payments. However, it’s important to note that entering into forbearance doesn’t eliminate your obligation to repay the missed or reduced payments. Typically, these deferred amounts are to be repaid later, often after the forbearance period concludes.

The specifics of the forbearance agreement can be negotiated with your lender, but typically, the initial forbearance period spans three to six months. The agreement will outline the end date, signaling when full payments are expected to resume.

Forbearance can provide vital support for borrowers navigating temporary financial hardships, such as job loss, allowing time to stabilize finances. However, it’s crucial to understand that failure to resume full payments after the forbearance period could lead to foreclosure proceedings.

What does a standard mortgage forbearance agreement include?

Under a standard mortgage forbearance agreement, your lender agrees to refrain from initiating foreclosure proceedings if you’ve fallen behind on payments. Instead, you and your lender collaborate to establish a revised mortgage plan aimed at ultimately bringing your payments up to date.

This temporary arrangement may involve reduced or suspended mortgage payments for a defined period. Typically, eligibility for such an agreement requires demonstrating and providing evidence of financial hardship. Following the negotiated forbearance period, you are required to resume making full mortgage payments.

How does a mortgage forbearance agreement work?

A mortgage forbearance agreement is the arrangement you establish with your lender to temporarily reduce or pause your mortgage payments, along with outlining the timeline and terms for resuming payments. However, before proceeding with this agreement, you must request that your lender place your loan into forbearance. Upon approval, both you and your lender can initiate the mortgage forbearance process, which involves drafting the forbearance agreement.

What does a temporary forbearance agreement look like?

Forbearance agreements vary among mortgage lenders as they are influenced by factors like the investor requirements of your loan and the specific type of mortgage you hold.

Regardless of your lender, the agreement will detail aspects of the forbearance period such as:

  • Duration of the forbearance period
  • Repayment plan for missed payments and potential late fees
  • Any required payments during the forbearance period
  • Reporting of forbearance to credit agencies
  • Accrual of interest on missed payments