If you are looking at foreclosure or delinquency generally, the forbearance agreement may seem like the perfect solution to your troubles. Essentially, you get more time to get your life in order, and the bank agrees to let you do this on the promise you will repay what you owe, in full. However forbearance agreements can be a huge mistake for borrowers who don’t understand that new loan conditions can cost a lot more than they bargained.
Forbearance favors lenders
Many lenders, are happy to try forbearance as a temporary alternative when weighing foreclosure proceedings, or use it as a means to forestall the inevitable and collect more. Legal advice simply says, “What’s the harm?” The lender either recovers what’s theirs, or they carry on with foreclosure proceedings just as they would have anyway. In this down market, banks aren’t in a hurry to foreclose, and may even look on forbearance more favorably as a means to keep foreclosures off their balance sheets.
Banks often begin foreclosure proceedings during the forbearance period, too. If a borrower can’t pay back exactly how they agreed, banks will be ready to seize their house the minute the forbearance period expires.
Forbearance often bears semblance to a solution
A year can seem like a long time, and that’s the trap of a forbearance agreement: can you reasonably expect to be back on your feet in 9-12 months?
Many people enter forbearance because they suddenly find themselves unemployed or underemployed. Still feeling optimistic, the forbearance agreement on a mortgage can, at first, seem an empowering way to recover lost momentum. However, even highly trained professionals are told to expect nine months or more before finding a job. That’s cutting it awfully close with your future under the terms of the average forbearance agreement.