Forbearance Agreements

Forbearance Agreements are an agreed upon set of rules to help the borrower (mortgagor) manage the payment of his mortgage. Currently, with the recent mortgage crisis, many borrowers have been facing financial stress and inability to keep up with the payments necessary to keep him and his family in their home. Many alternatives to foreclosure and eviction are available. It is important to be familiar with all the options available and to refer to qualified legal counsel before making any irreversible decisions.  
In the event that you have defaulted on your mortgage payment due to a cash flow interruption or temporary financial crisis, you may be able to negotiate a forbearance agreement with the lending institution to postpone, reduce, or suspend the monthly payments due on the mortgage for a specified amount of time and for a limited amount of money. The forbearance agreement forestays impending foreclosure and gives time to the debtor to recover financially and resume the payments. 
How do Forbearance Agreements Work? 
First, the request by the debtor must be approved by the lender. Then, during the time of forbearance, the lender simply allows the interest, which remains the responsibility of the debtor, to accrue and adds it to the principal balance on the loan at the expiration of the forbearance agreement. While the debtor is resolving his financial crisis, the lender neither pursues action on the property nor accelerates the payment plan. 
What Happens if I Default the Forbearance Agreement? 
In the event that you default on the payment schedule or any other terms outlined in the Forbearance Agreement, you can take no action against the lender to prevent the financial institution from collecting on the debt. You may negotiate the terms of your Forbearance Agreement to include the conveyance of the deed of your home in lieu of foreclosure, should you be unable to meet the terms.  
What Should I Know About Forbearance Agreements?  
It is critical for you, the default borrower, to understand that Forbearance Agreements are effective for short term or temporary financial problems only. They are designed for you to bring your mortgage current and pay it off. If you have a temporary situation such as unemployment or a medical issue that has resulted in an interruption in your cash flow, then Forbearance Agreements may be an excellent solution for you to handle your debt. However, if you have defaulted due to rising mortgage rates on a lower house value, especially as a result of an adjustable rate mortgage program, then Forbearance Agreements are not the appropriate solution for you. 
What Can I Do About an Adjustable Rate Mortgage? 
If you have defaulted on your mortgage as a result of an increase in the monthly payments of your adjustable rate mortgage, then Forbearance Agreements are not a solution for you. When you first signed, the adjustable rate mortgage appeared to have a huge benefit over the fixed rate because it allowed for lower monthly interest rates, until the market turned upside down leaving you with a skyrocketed interest rate, a devalued house, and a total inability to make your payments. If this is the case, it is highly recommended that you immediately contact qualified Legal Counsel who can advise you on your best recourse.