There are several steps that homeowners can take in an attempt to avoid foreclosure and keep their homes. Some of these steps or programs can be temporary fixes, while others are more permanent and can work to restructure the terms of the mortgage loan in order to make the payments more affordable for the homeowner. Temporary approaches focus on helping a homeowner who is experiencing temporary hardship avoid foreclosure. One temporary approach for a homeowner to avoid foreclosure is to apply for forbearance.
Usually, when a homeowner misses several months of mortgage payments without a prior agreement with the mortgage lender, the lender may be able to start foreclosure proceedings. Forbearance is a process through which a homeowner and the mortgage lender enter into an agreement that the homeowner will be allowed to miss monthly mortgage payments or to make lower payments for a period of time. A forbearance agreement assists the homeowner during a short period of time, usually up to six months, during which the homeowner is experiencing an unexpected financial problem.
Forbearance does not mean the missed or lowered payments are forgiven at the end of the forbearance period. Under a typical forbearance agreement, the homeowner agrees to make up the difference between the regular and lowered payments and any missed payments at the end of the forbearance period. These missed payments can also sometimes be absorbed into the overall loan owed, which can increase the monthly payments the homeowner owes after the forbearance period ends.
While forbearance seems like a good way to relieve the financial pressure of making on time mortgage payments while going through some tough times, it is not a good solution if the tough times are more long term. If the homeowner suffers a catastrophic injury and can no longer work to earn the amount of monthly income it would take to keep the home, the homeowner should pursue a different solution other than forbearance. However, if the homeowner is fired, and is in a field of work in which he or she can find another job in a few months, then applying for forbearance may be a good solution.
Mortgage lenders do not have to agree to forbearance for a homeowner, even one with a proven financial need. In some cases, whether or not forbearance is granted depends on the homeowner’s past payment history. The lender may offer a range of other loss mitigation options for a homeowner to choose from if forbearance is off the table. Before accepting any offers, the homeowner should always seek independent advice on the benefits of applying for a particular loss mitigation program in order to avoid getting into further trouble and then losing his or her home.
Contact Us for Legal Assistance
If you are experiencing financial hardship and would like to figure out the best way to handle your finances, call us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan. Our experienced attorneys can help you identify the options you have in terms of handling your debt and hopefully avoid foreclosure.
(image courtesy of Jesse Roberts)