What is a Forbearance?

 

With this option, you and your mortgage company agree to temporarily suspend or reduce your monthly mortgage payments for a specific period of time. This option lets you deal with your short-term financial problems by giving you time to get back on your feet and bring your mortgage current.

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Forbearance may be an option if you are:

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• Behind on your mortgage payments or on the verge of missing payments

• Experiencing a temporary hardship

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What are the benefits?

 

• Lower or temporarily suspend your monthly payment—giving you time to improve your financial situation and get back on your feet

• Less damaging to your credit score than a foreclosure

• Stay in your home and avoid foreclosure

 

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How does it work?

 

Forbearance reduces your monthly mortgage payment—or suspends it completely—during the forbearance period. If you qualify for forbearance, you and your mortgage company will discuss the forbearance terms:

 

• length of forbearance period,

• reduced payment amount (if the payment is not suspended), and

• the terms of repayment.

 

 

After the forbearance has ended, you will need to repay the amount that was reduced or suspended. However, you are not required to repay the missed amount all at once, though you have that option. Other potential options allow you to make an additional payment each month for a period of time until the past due amounts are repaid (see Repayment Plan), move the missed amount to the end of your loan term (see Payment Deferral), or set up a loan modification, if you are eligible (see Modification).

 

 

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What is a Repayment Plan?

 

With this option, you spread out your past due amount—added on to your current mortgage payments—over several months in order to bring your mortgage current.

 

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A Repayment Plan may be an option if:

 

• You are ineligible or don’t want to refinance

• You are facing a short-term hardship

• You are a couple (or several months) behind on your mortgage payments

• You can now afford your monthly mortgage payment

 

 

What are the benefits?

 

• Bring your mortgage current and resolve your delinquency

• Catch up on your past due payments over an extended period of time

• Less damaging to your credit score than a foreclosure

• Stay in your home and avoid foreclosure

 

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How does it work?

 

If you qualify for a Repayment Plan, typically your past-due amount will be spread out over a set time frame (e.g., 3, 6, 9 months) and added on to your existing mortgage payments. Other repayment terms may also be available during the repayment period (check with your mortgage company for details on your specific options).

 

Your mortgage company may have you sign an agreement that will outline how you are going to repay your past-due amount, such as the length of the repayment period and the specific terms.

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What is a Modification?

 

Under this option, you reach an agreement between you and your mortgage company to change the original terms of your mortgage—such as payment amount, length of loan, interest rate, etc. In most cases, when your mortgage is modified, you can reduce your monthly payment to a more affordable amount. 

 

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A modification may be an option if:

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• You are ineligible to refinance

• You are facing a long-term hardship

• You are several months behind on your mortgage payments or likely to fall behind soon

 

 

What are the benefits?

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• Resolve your delinquency status with your mortgage company

• May reduce your monthly mortgage payments to a more affordable amount

• Change the original terms of your mortgage permanently, giving you a new start

• Less damaging to your credit score than a foreclosure

• Stay in your home and avoid foreclosure

 

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How does it work?

 

A modification involves one or more of the following:

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• Changing the mortgage loan type (e.g., changing an Adjustable Rate Mortgage to a Fixed-Rate Mortgage)

• Extending the term of the mortgage (e.g., from a 30-year term to a 40-year term)

• Reducing the interest rate either temporarily or permanently

• Adding any past-due amounts, such as interest and escrow, to the unpaid principal balance, which is then re-amortized over the new term

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What is a Payment Deferral?

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This mortgage relief option moves past-due amounts from missed payments to the end of your loan term so you can keep the same monthly payment while bringing your loan to a current status.

 

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Payment deferral may be an option if you are:

 

• Behind on mortgage payments or at the end of a forbearance plan

• Able to resume your regular monthly payments (your financial hardship is resolved)

• Unable to catch up on outstanding balances with a reinstatement or repayment plan

 

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What are the benefits?

 

• Bring your mortgage current immediately

• Keep your monthly principal and interest payment the same

• Deferred amount does not accrue interest

• A better option than foreclosure

• Stay in your home and avoid foreclosure

 

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How does it work?

 

• You must contact your mortgage servicer to see if you’re eligible

• Your financial hardship must be resolved, and you must be able to make your regular monthly payments

• Brings your loan to a current status and keeps your principal and interest payment the same (note that escrow payment adjustments for taxes and insurance may affect your total monthly payment)

• Moves past-due amounts to the end of your loan term when they’re due with your last mortgage payment or earlier if you sell your home, refinance, or otherwise pay off your loan

• Your mortgage servicer will send you a Payment Deferral Agreement to document the solution

 

 

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What is a Refinance?

 

With this option, you receive a completely new mortgage with new terms, interest rates and monthly payments. The new loan completely replaces your current mortgage and may lower your payment, which could help improve your monthly financial situation.

 

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Refinancing may be an option if:

 

• You are current on your mortgage payments

• You have an adjustable rate mortgage or a high interest rate

• You have equity built up in your home

 

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What are the benefits?

 

• Make your payment more affordable by lowering your interest rate or adjusting the other terms of your loan

• Creates no negative activity or event on your credit history

• Stay in your home and avoid foreclosure

 

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How does it work?

 

If you qualify to refinance your mortgage, you’ll go through an application, approval and closing process (similar to when you got your original mortgage). Your mortgage company will work with you through every step, and will help determine the best mortgage option for your specific needs.