A forbearance agreement is an agreement with a lender where the borrower (or homeowner) is allowed to skip or make reduced mortgage payments. The biggest misunderstanding about them is that the homeowner still owes their lender the money they didn’t pay.
The time period the lender allows for reduced or missed payments is called the forbearance period.
Sometimes the forbearance agreement can require a balloon payment (all of the missed payments at once) at the end of the forbearance period.
The availability of a forbearance agreement depends on the type of loan and the policy of the lender or company collecting the payments.
Over the years, I have seen a lot of problems with forbearance programs. Many times the credit reporting gets screwed up and the application of payments, interest, fees and costs can be a complete mess. I have had clients come in after a forbearance program with an unintelligible pile of conflicting notices and letters leaving them hopelessly confused as to how much they actually owe their lender.
If a homeowner applies for a forbearance program, it is very important to get written confirmation of exactly what the agreement is. That way, if the accounting or credit reporting gets screwed up, they have a clear record of what the agreement was. If you don’t have the agreement in writing, it is very hard to prove what the deal actually was.
The person the homeowner is dealing with at the bank at the time of the agreement, may not be the same person they are dealing with 3, 6 or 9 months later.
When evaluating the opportunity to apply for a forbearance agreement, it is always a good idea to consult with a local foreclosure attorney to understand all of your options and legal rights.
If you are facing foreclosure in McHenry or Lake County, Illinois, the legal team at Adam Diamond Law would be happy to help you understand your options.
DISCLAIMER: This article and any information contained herein is solely for informational purposes. While it is important that you educate yourself, nothing herein should be construed as legal advice or create an attorney-client relationship. For specific questions, I always urge you to contact a local attorney for advice pertaining to your specific legal needs.