Assistance from mortgage forbearance.
Many lenders currently provide a number of borrowers with a temporary suspension from their monthly mortgage payments. This respite is known as mortgage forbearance. While the programs offered will vary by lender, and it also depends on several factors including the borrowers financial picture, past payment practices, and future prospects, the relief can last up to 6 months or longer in certain cases. This provides the homeowner and lender the opportunity to work on long-term loan modifications, and also offers the borrower time to improve their financial condition.
Banks and lenders can now reduce loan payments to more affordable levels for those homeowners who are falling behind or who have defaulted on their mortgages as a result of a salary reduction, job loss, medical emergency, or some other crisis. The reason to apply for this type of service needs to be due to a one time financial hardship.
While forbearance will suspend payment for a period of months, the longer term goal of mortgage forbearance is to establish new payments that would be low enough for the borrower to allow them to pay for reasonable living expenses. So the homeowner should be able to pay for all of their regular bills, in addition to the home loan, and it will to provide them time to get back on their feet. Then, as the homeowner’s financial situation returns back to normal, their monthly payments will be accordingly adjusted higher.
How do forbearance agreements and programs work?
While each specific lender or banks program terms may vary, the bottom line is that forbearance agreements are plans that are put into place that will allow borrowers the ability to repay a delinquency on their mortgage over time. In most cases, a forbearance will suspend or reduce the monthly payment. It will also generally set up a new payment at the expiration of the agreement. A lenders forbearance program may include one or more of the following options for homeowners.
- Most will include some type of suspension or reduction of the mortgage payments for a period of time that is sufficient to allow the borrower to recover from the cause of default, and allow the borrower time to get back on their feet.
- Some programs will allow for a period of time during which the borrower is only required to make their regular monthly mortgage payment before beginning to repay the arrearage on their loan.
- In addition to the two components above, the agreement may also require a repayment period of at least six months on any assistance provided.
In addition to above, some forbearance agreements may also have the lender try to recoup some of its expenses over time. For example, they may require reasonable late fees as well as any other applicable foreclosure costs that were accrued prior to the execution of the forbearance agreement to be included as part of the repayment plan that the homeowner enters into. Some programs may add these costs to the monthly payments, while others may require that they only be collected after the loan has been reinstated by the lender through the repayment of all principal, escrow advances, and late interest.
However, over time the regular mortgage payments will be phased back in or resume in full as this is not a permanent solution. At that point some type of regular monthly payments are required to be made by the homeowner according to their loan agreement. Oftentimes an additional monthly payment is made each month that is applied to the delinquent amount.
After the suspension or reduction period ends, and after the delinquent amount on the loan is paid in full, the normal monthly payment will resume and the bank or lender will fully reinstate the loan.
Forbearance programs from lenders
Citi has created the Homeowner Unemployment Assist program. There may be other services available as well. Currently this assistance program lowers the monthly payment for many unemployed families and individuals to $500 per month for three months. There may also be criteria for other low income homeowners to meet.
To qualify for this form of financial aid, a homeowner must have a loan both owned and serviced by CitiMortgage, and they also need to be at least 60 days or more delinquent on their mortgage payment. A Citibank spokesman said the bank is always reviewing its programs, and is considering whether they would adopt the F.D.I.C.’s six-month forbearance policy. 1-800-248-4638. More.
JPMorgan Chase has a forbearance program as well. They look at several factors, and usually what it comes down to is that if the borrower’s income is not certain at the moment, or is too low, but there are prospects for future employment by the borrower, then they may decide to offer them a loan forbearance program. This will allow the borrower to pay a reduced amount on their monthly payment, or even completely suspend the payment, for a limited length of time, which is often between three to six months. For more information, dial 1-800-848-9136.
Wells Fargo has had a plan in place that for years has offered mortgage forbearance for struggling and/or unemployed borrowers who are facing short term pressures and cannot afford to pay their home loan on time as a result of that. They do not have a standard policy, and will review the personal and financial condition of each borrower. Call the lender to inquire.
The nature of the forbearance program terms offered to a homeowner is highly dependent on the customer’s full financial and personal circumstances, and if the customer has had consistent payment practices in the past and future prospects, they will receive more assistance for their mortgage payment. Wells Fargo is also actively reducing principal on customers loans. 877-937-9357. Read more.
Bank of America also offers a forbearance program. They will suspend payments for up to six months. There may also be other assistance available from their forbearance program, according to bank’s credit loss mitigation strategies executive. Each application is reviewed on a one off basis.
The spokesperson continued to say that homeowners will generally receive better mortgage forbearance packages and terms if they have reasonable prospects for future employment. However, that is only one criteria. The bank will also examine the borrowers financial management skills and past payment practices. For example, Bank of America will also looks at past mortgage-payment habits and overall debt payment success, among other things. More on Bank of America forbearance.