Forbearance Agreements Can Stop Real Estate Foreclosure

May 14, 2009 by  
Filed under Foreclosures

Losing a job or suffering from a major illness or injury can greatly reduce your ability to stay current on your mortgage and cause significant financial strain. Foreclosure proceedings can be imminent, but you do have options to avoid or stop them in their tracks. Contacting your lender and negotiating a forbearance agreement can help to alleviate the burden of a high mortgage payment temporarily, either by delaying the payments completely or significantly reducing them to a more comfortable level.

Eventually, you will have to make the full payments again, but this temporary agreement can help you through the financially tough times until you get back on your feet and resolve your current status. Occasionally, as an act of good faith, your lender will require a down payment upfront to enter into this type of agreement.

Sometimes, the most difficult part of reaching an agreement is finding the correct person or department to communicate your needs to. They must not only be able to mutually determine the terms, but also authorize the plan to make it official. If you simply call the main branch, they may give you the runaround. Collection departments are most likely going to be able to refer you to the correct party, but you’ll have to be persistent; their job is simply to obtain any type of payment from you, so make sure you’re making a payment on a forbearance.

You can always ask for a manager to negotiate the agreement and communicate your current position. Once you find the correct person and agree to terms, ensure they mail you a copy of it in writing with a signature and date. Also remember to record every person and extension you speak to, and outline the subject and discussion you had with that person – you may need this information later.

The key to preventing a bank foreclosure is to initiate a discussion with your lender as soon as you know there will be an issue holding up your end of the bargain. Even if you haven’t missed a payment yet, but just lost your job today, it’s a good idea to contact them and advise them of the situation. As time goes on and the situation worsens, your options will become very limited when it comes to mortgage foreclosure and resolving it.

An important thing for you to remember is that you really have the ball in your court. Foreclosure proceedings are a legal mess, and will cost your lender significant legal fees and lost time, so they prefer to avoid it at all cost. If you maintain communication with them and fulfill your part of any agreement reached, they will most likely work with you until your situation changes or improves.

That being said, your lender is also in the business of making money, and a forbearance agreement can significantly reduce their profits. Maintain your patience and a calm state of mind, and be prepared to go back and forth several times before an agreement is reached. It’s also a good idea to retain an attorney or become familiar with state and local laws so that you remain informed about your rights and what your lender can and cannot do.