One of the options you might have in avoiding foreclosure is sometimes called Forbearance. It's often spelled with an e (Forebearance) probably because of it's relation to Foreclosure.

Forbearance or more accurately, a Forbearance Agreement is exactly that. It's an agreement between you and the lender. It generally allows you to stop making payments now, (temporarily) and add those payments to the end of your loan. Some forbearance agreements allow a gradual payback .

Unlike other loans you might have, if you fall behind on your mortgage, in order to catch up you'll have to completely catch up. Your Visa card will gladly take any money you send them. Your mortgage servicer will actually return your incomplete payment.

Got Examples?

You bet! Here's two.

Joe vs. the Volcano

You probably know Joe. Maybe not by name but you remember him. He worked on a fancy cruise ship. Joe's job is to light the Baked Alaska. He's a highly trained and well respected person. It's a dangerous job. Very few can do what Joe does.

Unfortunately, Joe lost his job. Out of respect to Joe's privacy I can't go into details here.

He found a new company almost immediately. On another ship, with another cruise line that would hire him, but because of the nature of his job he would have to wait almost six months to set sail. He was out of work for almost six months!

Joe looked at Craigslist to no avail. Joe used all his savings and tried to keep up with his payments. He was more than 3 months behind. Now that he had his first paycheck in hand, it was time to make his mortgage payment. Joe called his Lender. His Lender said he needed to pay all the missed payments, plus all the penalties. Joe didn't have that kind of cash. Joe called his Lender again and this time they were very rude to him. They told him to just make his payments.

Joe was distraught. He was ready to walk away, to let his home go into foreclosure. He wanted his home, he had a job, and he had a mortgage he could pay, he just couldn't catch back up.

Joe was talking to the wrong people. He was talking to his lender's collection department. It wasn't his fault, it's where they sent him.

Enter the Forbearance Agreement. Joe finally got to the correct people (not the collections dept). Together they worked out a Forbearance Agreement. He would start making his payments again and, because he could, he would also start catching up on the amount he was behind. Joe was now back in good standing with his lender!

Don't Stand by Kathy

Kathy didn't lose her job. Poor Kathy was having the time of her life! She was enjoying yet another cruise off the Sicilian Coast.

Marvin and Melissa had never been on a cruise. They were a young couple honeymooning from Paducah, KY. They were seated at the table next to Kathy. Marvin wasn't feeling so good. Maybe it was the tequila shooters at lunch, maybe it was the seasickness. Whatever it was, just as the waiter started to Flambe their dessert Marvin's stomach decided to return it's contents to the dinner table. Remember the pie eating contest in "Stand By Me"? Keep that thought.

The unfortunate waiter, who was a highly trained professional and had thought up this moment that he had seen everything, suddenly realized he had not (seen everything). In his surprise, the dessert cart went flying!

Poor Kathy. She suddenly found herself an integral part of the Baked Alaska, lactose intolerant as she was. The caramelizing sugar, estimated to be at 320 F, caused 3rd degree burns over much of Kathy's arms and legs.

Always proactive, she called her lender from the helicopter. Kathy faced a month in the hospital. It would be two months before she could return to her job as an exotic belly dancer in Vegas. She initially talked to many of the same people Joe did. She also got many of the same answers. Luckily she finally ended up talking to the right person. He arranged a Forbearance Agreement that put off her payments for the next two months and added them to the end of her loan. Kathy was back to being good with her Lender.

So there's two fine examples of how a Forbearance Agreement could help.

Labels: debt forgiveness, Forbearance, Short Sale Negotiation