Forbearance

• Suspension of mortgage payments through forbearance is a temporary solution, generally lasting between three and six months. Getting a forbearance on a mortgage loan is a viable option for homeowners who are experiencing a short-term financial setback or drop in income. The lengths of forbearance periods vary, and lenders determine these periods on a case-by-case basis. To determine the duration of the forbearance, lenders often assess the borrower's financial ability to continue making regular monthly mortgage payments after the forbearance period ends.
  
  

Qualifications and Documents

• Generally, homeowners need to be at least three months or 90 days, but no more than 12 months, behind on their mortgage payments to qualify for a forbearance program. The home must also be the homeowner's primary residence. Homeowners have to provide lenders with a hardship letter explaining their current financial situation and the causes behind their inability to make their mortgage payments. They also have to provide the lender with their federal tax returns for the last two years.
  
  

Considerations

• After the forbearance period ends, the lender spreads out the past due amounts owed over a number of months, usually anywhere from 12 to 24 months. This means that borrowers have to pay a portion of their past-due amount along with their regular monthly mortgage payments. This effectively causes the overall mortgage payment to increase. Before agreeing to a forbearance, borrowers need to assess whether they're able to pay the increased payments after the forbearance period ends. If borrowers can't afford the extra amount, they should look into alternatives to forbearance.
  
  

Alternatives

• A loan modification, interest-rate reduction and term extensions permanently change the original terms of the mortgage loan. These alternatives are long-term solutions and may better benefit homeowners who don't see their financial situation changing anytime in the near future. A loan modification decreases the borrower's mortgage payments to reflect their changes in financial circumstances. An interest-rate reduction plan lowers the original interest on the mortgage loan to help make the payments more affordable. A loan extension plan lengthens the repayment term of the original loan to help lower payments.