Unexpected hardships like unemployment, divorce, and natural disasters can be devastating both emotionally and financially. What's worse is the fear of losing your home because you can't make your mortgage payments. Luckily, your lender may grant you a special forbearance, which gives you a temporary break from your mortgage payments while you get back on your feet.
What Makes This Type of Forbearance So Special?
Loan forbearance, a type of loss mitigation, is the process by which a lender agrees to temporarily reduce or suspend a borrower's mortgage payments because of temporary hardship. While the bank has the legal right to initiate a foreclosure, it forebears, or holds back, this legal right and instead works with the borrower to bring the loan balance current.
A special forbearance offers a greater variety of relief to borrowers, including more time to catch up on overdue payments, and the option for borrowers to delay repayment of the back amount owed. Typically, special forbearance is available to those who have missed no more than 12 months' worth of mortgage payments.
Do I Qualify for a Special Forbearance?
The circumstances in which a lender will consider a special forbearance will vary. However, typically, lenders will grant a forbearance due to these sorts of events:
- Loss of employment
- Death of co-borrower
- Impact of a natural disaster
- Temporary illness or injury
- Other emergencies
Further, to qualify for a special forbearance, your special circumstances must be temporary and have a clear end-point. A good example is if you are forced to temporarily live in a hotel after your home is flooded, and you are waiting for an insurance pay-out to cover the additional cost of living expenses. Your lender may grant you a special forbearance on your mortgage payments until your pay-out arrives.
If you have a loan insured by the Federal Housing Administration (FHA), in order to obtain a special forbearance, you must be able to demonstrate a loss of income due to unemployment. The FHA special forbearance program extends the forbearance period for up to 12 months to give the homeowner time to find a new job.
How to Get a Special Forbearance
Obtaining a special forbearance begins with contacting your lender. Explain your situation and the nature of your financial difficulties and ask if a forbearance is a possibility. Keep in mind, you will need to be able to demonstrate that your situation is only temporary and that you will be able to resume your regular mortgage payments in the relatively near future. Also, be prepared to demonstrate your good faith efforts to pay your mortgage and to reduce your expenses. Your lender will likely request that you submit certain documentation, including information about income and monthly expenses as well as a hardship letter.
Keep in mind, loan forbearance is not loan forgiveness. Once your financial situation improves, you will be required to repay the past amount due, including principal, interest, taxes, and insurance. You may be required to make higher monthly payments until your loan is current, or make a one-time payment of the full past due amount. Or, your lender may agree to add the full amount due to the back end of your mortgage, which will extend the length of your mortgage until the entire balance is paid off. The terms of your re-payment will be set out in your forbearance offer, so be sure to carefully review this document, preferably with an attorney.
If you're having trouble communicating with your lender, you can also explore housing counseling from a housing agency approved by the U.S. Department of Housing and Urban Development (HUD). An experienced housing counselor may be able to assist you for free or at minimal cost.
Get Legal Help with a Special Forbearance
If you are struggling financially and are considering requesting a special forbearance, or need help reviewing a forbearance offer from your lender, consider talking with a lawyer. Conferring with an attorney experienced with foreclosure alternatives will help you understand all of the options available to you and allow you to make an informed decision.