This problem plagues a lot of homeowners. It can happen because of unexpected financial bumps in the road, or because the homeowners have variable income. Things like sales commissions, bonuses, tips, stock market etc., can all lead to these hiccups.
One option that a homeowner may try to take advantage of is Forbearance. Forbearance is when the lender (bank) decides not to exercise the right to foreclose on the delinquent homeowner, and instead elects to work with the homeowner over a series of payments to bring them current. The terms of the agreement will most likely be favored toward the bank. The reason for this is because the bank holds all of the bargaining power due the homeowner being delinquent on their mortgage. However, these agreements are still to the advantage of both parties: the bank doesn’t have to evict and they’re more likely to get their money, the homeowner still has a home.
Is It Right For Me?
Typically, a forbearance agreement isn’t one that can fix a permanent financial shortfall. In other words, if a borrower had a rough few months and couldn’t make the payments, but will shortly be back to full financial steam, then forbearance may be an option. If on the other hand, the problem is a more permanent kind then it’s unlikely that forbearance is something that will be available.
Homeowner 1 lost his job and was delinquent a few months, but he just started a new higher paying job. Forbearance may be an option. But borrower 2 has an adjustable rate mortgage and the rate has gone up such that his income cannot support the payment. Forbearance is unlikely to be available.
Anyone experiencing trouble with making their mortgage payments should seek financial help. The worst thing to do is wait until it is too late and the home is lost to foreclosure. Time is of the essence.