I have been given a forebearance option on my mortgage, can you pls tell me what it means, or what the pros and cons are?I will appreciate your answer in a layman terms.Thanks
State/Country relating to question: Minnesota
A forebearance plan - this process involves the reduction or suspension of payments for a period of time followed by a period of time during which the deferred payments are made up, similar to the repayment plan.
A repayment plan - this process involves making up the amount past due over a period of months by paying a full payment plus a partial payment on the past due balance each month. Usually with this plan the debtor is required to give their lender lender a cost contribution equivalent to 40-50% of their total arrears (total of late payments, bank fees and attorneys fees). Coming up with such a lump sum is quite difficult for homeowners who just faced a hardship.
What the pros of the forebearance plan - there are only positives with one exception - the exception is that you will have to not only pay current mortgage obligation but also additional monies to make up for the amount past do. The benefits of this plan are many - it allows you time to overcome the hardship just faced, allows time to save some money to help with the future payments - the biggest is that it stops the foreclosure.
I would prefer to see a loan modification rather than a forebearance - a loan modification lowers the interest rate being paid thereby lowering the monthly payment - sometimes the borrower can even get the lender to reduce the loan amount too.
20 years extensive experience in real estate law, foreclosure, finance, and landlord tenant law.
Do you think this is a good option?
if yes, or no what are the risks and benefits?
I would prefer for you to get a loan modification. However, if that isn't or wasn't offered I would try to talk to them again aobut such. If they won't give you a loan modification - this is the best way to keep your house if that's what you want to do. Too, even if you don't want to keep the house - it would buy you time to find a prospective buyer.
So, I think it's a good option if that is your only option to keep your house. It's better than refinancing (which you probably couldn't do anyway), a short sale (because your then homeless), a deed-in-lieu of foreclosure (because, again, your out of the house and homeless).
There are no real risks other than if you can't afford the regular mortgage - because you will have to eventually not only pay the current mortgage amount but also so much towards the arrearages that have accumalated.
Thanks sooooooooooooo much, I appreciate you help, and you are the type of person I would love to request anytime.
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