A forbearance agreement is a temporary arrangement to prevent foreclosure. The agreement is between you and your lender and outlines a plan for getting your mortgage payments back on track. Forbearance agreements are available only for people who are behind in their mortgage payments and can show that they have the financial ability to live up to the terms of the agreement.
Mortgage Default
Most mortgage contracts allow the lender to declare that your mortgage is in default if you miss a payment by even one day. However, few mortgage companies are likely to do that. Usually late notices are sent out a few days after you miss a payment, with collection efforts intensifying if you fall 30 days behind. At 30 to 60 days in default, the lender may think seriously about starting foreclosure.
Contacting Your Lender
The Federal Trade Commission reports that contacting your lender is the most important thing you can do to avoid foreclosure and to be offered a foreclosure avoidance program such as forbearance. It is smart to contact your lender even before you start missing payments because early notification allows you more options, including forbearance. It also shows the lender that you are proactively managing your finances, making it more likely that the lender will consider forbearance or another workout program if your financial hardship continues.
Forbearance Terms
Forbearance agreements can be structured in many ways. For example, forbearance can allow missed payments to be tacked onto the end of your loan, immediately bringing your account current. That would also end any foreclosure proceedings. Other forbearance agreements allow your monthly mortgage payment to be significantly reduced or even suspended entirely for a period of time, usually about three months. The agreement possibly could be extended if your situation has not improved.
Negotiating Forbearance
You can ask directly for a forbearance by contacting your lender and explaining your situation. However, dealing with missed mortgage payments and possible foreclosure can be very stressful, possibly making it hard for you to negotiate directly with your lender. Nonprofit credit counselors can help with that. Counselors certified by the U.S. Department of Housing and Urban Development can contact lenders on your behalf to negotiate the best forbearance arrangement possible for your situation. The counselors can contact your lender with you on the phone and you'll be free to fully participate in the discussion. Certified nonprofit credit counselors, such as those affiliated with the Consumer Credit Counseling Service, are located nationwide.
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