Is Forbearance Right for You?

by on March 7, 2012

Many people are having trouble making their mortgage payment, for a variety of reasons, most notably, having been layed off from their job. Fannie Mae and Freddie Mac have designed programs specifically to help people in this situation. The fact of the matter is, these are short term programs. Here are just a few of the things you need to know about a program like forbearance.

  • In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments.  The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
  • There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments.  The unpaid balance continues to increase during this time.
  • The new temporary mortgage payment is often set to 31 percent of the household income; in some cases lenders agree to accept no payments.  Fannie Mae’s extended unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
  • However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
  • Because some agreements add onerous terms and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Development.

Before you decide to pursue one of these programs, do your homework. Call a respected professional. If you need to, please feel free to call me at 408-839-2125 and I will offer assistance in answering your questions or put you in contact with the right professional, whether it is a lawyer or tax professional. I am here to help you in any way I can.

Be Sociable, Share!

Previous post:

Next post: