Forbearance is a fancy word for not taking action. In mortgage terms it means that the Lender agrees not to take foreclosure action against you, the borrower. Forbearance Agreements are short term solutions to buy some time. If you have or are considering entering into a Forbearance Agreement with your Bank be careful to read the details. Banks have always asked for attorney's fees. Penalties for late payments are also severe. These fees are always added to the balance due, unless you negotiate upfront.

Forbearance through the CARES Act of 2020 offers payment postponement and payment reduction options. Forbearance Agreements do not erase the amount you owe, but it temporarily suspends or reduces your payments. At the end you must pay what you missed. You have 5 options at the end of your Forbearance Agreement:

1. Reinstatement - you pay the total amount all at once.

2. Payment Plan - you pay the total over 6-12 months.

3. COVID Payment Deferral - you further delay repayment by giving a 2nd mortgage at 0% interest for the deferred amount.

4. Loan Modification - you must qualify for a lower payment and trial period.

5. Refinance - you must qualify for a new loan based upon your current credit and payment history.

Remember these 2 important points:

1. 90% of homeowners fall out of the Forbearance Agreement in the first 2-3 months because of failure to pay on time.

2. Just because you have worked out a deal with the bank, you are not out of foreclosure. You are sill in foreclosure until your Trial Period is complete.

Then and only then, will you get a foreclosure withdraw letter from the bank, stating your loan is current. In the meantime, the bank will keep passing the foreclosure date every month.

Let's look at how this is done:

Let's say today is the day you entered into your Forbearance Agreement. You make your payment to the Lender's special account. They will not take checks at this time and will require certified funds.

Next month the first comes and your 1st scheduled payment is due. Once again you will need to send this payment in certified funds. This requires you to get a cashiers check from your bank and mailing the payment. You will want to send it 5-7 days early to make sure they receive it in time. On the day before its due you will want to call the bank to verify they received the money in time. This is a must! Once your payment has been received, processed and accepted in their special account they call the Public Trustee and set a new sale date. They do not cancel the foreclosure. You are not out of the woods yet. You are not out of foreclosure until the Trial Period is completed on time.

Unfortunately 90% of homeowners fall out of the Forbearance Agreement in the first 90 days because of the strict schedule.

Let's say you're payment is delayed by the post office, the bank or a holiday. Or your bi-weekly payday falls on the wrong day which doesn't leave 5-7 days to mail the cashiers check before the due date. Once you're even a day late you no longer have an agreement with the bank. Your Forbearance Agreement has been voided. Your house will go to sale at the next sale date or as soon as foreclosures start again. The Bank does not need to file a new foreclosure. You're out of time. All of the upfront Forbearance Agreement money you paid is gone and you have to move fast.

This can be a truly great option for homeowners who can commit to the new payment plan. Forbearance Agreements are strict plans with sever consequences. You are never out of foreclosure until the Trial Period is completed on time. Terms and times are negotiable before you sign. There are pitfalls and you do need my assistance to do this. Remember banks are sneaky, don't trust what they say, everything must be in writing, before the money is sent to them. Call me anytime to discuss your situation.