Forbearance
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A forbearance is an agreement between the home owner and the lender whereby the lender agrees to a postponement of mortgage payments for a period of time. During this time, payment may be entirely suspended or significantly reduced.
This may be a good solution to avoid foreclosure for those who have lost a job or have a temporary disability.
At the end of the forbearance period, the home owner and lender set up a payment plan for the missed or reduced payments. This may include paying back the missed payments over time or adding them on to the end of the loan period.
Pros:
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Allows the home owner to avoid foreclosure during a short period of hardship.
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Suspends foreclosure and allows home owner to have time to catch up on past due payments.
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Brings account current during specified period of time.
Cons:
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Your loan is not fully reinstated until you pay the amount you are behind. (Unless it’s added at the end of the loan term.)
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A foreclosure is put on hold while you are in forbearance, but not canceled until the payment plan is completed.
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If you miss a forbearance payment, you go back to where you were in the foreclosure process.
A forbearance may allow a home owner with a temporary hardship to remain in their home over the long term.