Borrowers struggling with mortgage payments have options to avoid a default and foreclosure. By contacting the lender, borrowers may request temporary financial relief through a mortgage forbearance agreement.
A forbearance application may require documentation proving a short-term crisis. As noted by Bankrate.com, a lender may ask for a layoff notice, bank statements or medical bills before approving a forbearance request.
The duration may depend on the type of home loan
If a lender approves, a borrower may suspend or lower monthly mortgage payments. The duration of forbearance generally depends on the type of loan. Borrowers with mortgages guaranteed by the government may obtain up to 15 months of relief during unforeseen circumstances.
Private mortgage lenders, however, may suspend or lower monthly payments for a period of time agreed on with the borrower. Forbearance may also require the borrower to catch up on missed payments in the future. When a borrower and lender determine a new payment schedule, along with the interest and penalties for default, a signed mortgage forbearance agreement requires both parties to honor their contract.
Breach of contract may result in a legal action
One of the nation’s largest mortgage service providers unlawfully foreclosed on borrowers who had mortgage forbearance agreements. The Consumer Financial Protection Bureau and 50 state attorneys general filed a lawsuit against the lender.
As reported by CNBC, the company agreed to not foreclose on borrowers who had pending forbearance applications but failed to honor its promise. Borrowers in bankruptcy allegedly had their homes foreclosed when the company did not uphold its loan modification agreements. The action resulted in a settlement of more than $90 million, which included $73 million that went to aggrieved borrowers.