Loan Forbearances

A forbearance is a plan offered by your lender to help you get caught up and save your mortgage if you temporarily fall behind. If you have a temporary financial hardship, a forbearance can get you through the situation until your finances improve. A forbearance gets your house payments (including principal, insurance, taxes, and interest) reduced or suspended altogether. This will last for a set period of time.

What kind of situation might lead to a forbearance?

Your situation must be temporary to make you a good candidate for a forbearance. Some circumstances that might qualify include:

  • Medical Illness
  • Death of a co-borrower
  • Natural Disaster
  • Unemployment

In all cases, your circumstances must have an end after which you can resume making full payments. You’ll also have to repay the amount that was past due once you are caught up; this repayment may be part of your forbearance plan.

Lenders must negotiate each forbearance based on the individual borrower’s specific situation and come up with specific plan. These plans are required to be realistic; your lender will ensure that you have the ability to repay any plan they agree to.

There are three kinds of forbearances:

  • An informal forbearance is a verbal agreement. This can be used for debts that are late by 3 months or less. This is a good first solution to a loan that is only one or two months late; if you are able to get an informal forbearance and get your loan back on track quickly, you’ll keep your situation from getting too much worse.
  • A formal forbearance is a written agreement. This is used for debts that are more than 3 months late but less than 6 months late.
  • A special forbearance covers different situations and has many special requirements. We’ve written an article dedicated just to special forbearances.

Whatever kind of mortgage relief you need, talking to a housing consultant from a HUD-approved agency is a great place to start. There you can ask questions and get expert counseling and advice. You’ll be able to find out ahead of time whether a forbearance is a good solution for you, which kind of forbearance you might need, and how likely you are to qualify.