Mortgage Forbearance May Provide Relief

The US economy, which lost 20 million jobs last month, has made keeping up with mortgage payments even more challenging for many homeowners in Maryland. Forbearance, under certain circumstances, may be a reasonable option to prevent mortgage foreclosure.

With forbearance, borrowers may temporarily suspend their mortgage payments because of financial difficulties. These payments are delayed and not eliminated and must be paid in the future.

A forbearance is often confused with a modification or repayment plan. Forbearance policies must be followed, and their terms are usually nonnegotiable.

The Care Act requires that loan servicers have forbearance plans available to homeowners with a federally backed mortgage. A mortgage backed by the Federal Housing Administration, Veterans Affairs, Agricultural Department, Fannie Mae or Freddie Mac are examples of these mortgages. These borrowers are eligible for up to 180 days of forbearance.

Borrowers with other mortgages may eligible for forbearance. Availability and the type of forbearance depends on the lender and the type of mortgage.

Mortgage servicers decide forbearance. These are companies, which may not be the lender, that receive monthly payments. Lenders often sell the mortgage servicing rights to these companies. Because servicers seek to collect the greatest amount of return on a mortgage, they may not present the best forbearance options to homeowners.

Before seeking forbearance, you should know have information about your income, expenses and type of loan so that an affordable repayment plan can be filed. Pay stubs, bank statements and other documentation is important.

The person who answers call for the servicer may not have the power to set an agreement so it may be necessary to speak to a manager. If approved, obtain a written forbearance plan and agreement.

The Cares Act prohibits servicers of federally back mortgages from making negative reports about the borrower to credit bureaus during the forbearance period. Otherwise, credit reporting depends on the forbearance program.

A reputable housing counselor can assist you with seeking forbearance. But an attorney can also provide many additional legal options such as mortgage modification, deed in lieu of foreclosure and, where debt is insurmountable, bankruptcy.