Forebearance agreement

 

Previously, we talked about different options to avoid foreclosure on a mortgage.  Today we will address a forebearance of mortgage agreement.  This is not a definitive discussion and we strongly suggest you consult with an expert in your area. 

 

A forebearance agreement is only one of several ways to avoid foreclosure.  It is simply an agreement between the bank and the borrower or homeowner to delay payment of the monthly payment for a specified amount of time.  The borrower usually has to be able to make a payment of at least 50% of the delinquent amount and can pay back the full amount due within two years.  If there is a lot of equity in the house, the borrower might be able to refinance the house to cover the amount due.  Refinancing could salvage the house, but is very likely to result in a much higher interest rate on the new mortgage.  The higher interest rate may be worth it to save the equity in the house.  Of course, if there is little or no equity in the house, refinancing is not likely.

 

Unfortunately, national statistics show that it is very likely that the borrower/homeowner who has fallen behind on the present mortgage is going to default on the new note within just a few months to a year.

 

Next time, we will address the relative merits of seeking a forebearance agreement or going with the short sale option.  To learn more about the short sale option to avoid foreclosure, visit www.YourHouseOptions.com.