The process of requesting and applying for mortgage loan forbearance varies based on the practices of the individual lender servicing a home loan and the type of mortgage in question. In most cases, however, a lender’s loss mitigation department will request a hardship letter from the mortgage holder before formally agreeing to allow loan forbearance requests. A homeowner also needs to consider whether forbearance will actually remedy their mortgage payment issues, or whether the forbearance period will simply prolong the inevitable, foreclosure on their home. From a lender’s perspective, determining whether a forbearance period will temporarily assist a homeowner and allow them to pay out the life of the loan over time is truly the deciding factor.
Initial Discussions with Your Lender
As soon as a homeowner recognizes their mortgage may be in jeopardy of default, they must contact their lender’s loss mitigation department and explain their situation. With this information provided and some instructions from your individual lender, a homeowner generally will be afforded the opportunity to send a hardship letter to request some form of mortgage workout, such as forbearance. Each lender will practice different protocol for hardship requests involving forbearance; however, most will require a formal hardship letter for their records.
In addition, before going forward with a forbearance request, homeowners should understand the terms their lender may be willing to offer. These terms may or may not be a solution to the case-specific issues concerning a given homeowner. In addition, homeowners should learn more about proposed forbearance periods, including how the unpaid amount is worked into the mortgage, whether any other adjustments or modifications will occur, and how future payments will stand following a forbearance period. Before sending the formal hardship forbearance request, homeowners may only be able to receive general information on these policies from their lender, but after sending a hardship letter and before agreeing to any forbearance period, a homeowner should press their lender to answer these questions in full.
Preparing a Hardship Letter for Mortgage Loan Forbearance
If a homeowner specifically desires forbearance to remedy their inability to meet current mortgage obligations, the homeowner will most likely have to plead their case in a hardship letter. The format and content of the letter is typically the same for all workouts with lenders, however, the following are some forbearance specific considerations that a homeowner should include in their hardship letter:
- Clearly request forbearance as the proposed remedy to your existing mortgage facing default, including potentially setting timeframes of desires forbearance periods and whether partial or no payments will be made
- Demonstrate and document that a temporary hardship has occurred, but more importantly, demonstrate how this hardship can be overcome, at least in a financial sense, by the end of the forbearance period. For example, countless forbearance requests are approved based on unemployment hardship. If a homeowner can show the prospect or likelihood of another income in the future before the end of a forbearance period, the more likely the request will be approved
- Demonstrate and document that the current hardship is both temporary and that one’s current inability to meet mortgage obligations is not related to more fundamental financial problems, such as an adjustable rate mortgage resetting
- Document current income and expenses, while at the same time, document actions taken to prevent default before requesting forbearance, such as reductions in expenses and attempts to find other sources of income
By working all of the above items into a standard hardship letter, alongside adequate documentation, a homeowner will most likely see a favorable response from their lender.
Getting Legal Help
Though a temporary reprieve in payments is helpful for struggling homeowners, in many cases, there are more fundamental issues afoot than simply temporary hardship. In other cases, forbearance agreements may not necessarily work in the favor of a homeowner in the long term. Having an attorney’s counsel on the overall perspective of your current mortgage payment problems is helpful. In addition, if decided to be the best route, an attorney can assist with preparing and filing a hardship letter with your lender, as well as engaging in negotiations on the terms of the proposed forbearance period on behalf of the homeowner, as well.
