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    What is forbearance? How does it work?

    We are getting a lot of questions about forbearance these days. Many are asking what forbearance is?

    For·​bear·​ance | \ fȯr-ˈber-ən(t)s

    Definition of forbearance:

    1. A refraining from the enforcement of something (such as a debt, right, or obligation) that is due.

    Many are asking how forbearance works.

    While mortgage companies may handle forbearance a few different ways, below is a simple explanation of how many times forbearance works…

    Mom & Dad have a mortgage. The payment is $1,500 per month

    Dad gets laid off, calls his Mortgage Company, and asks for help.

    In one phone call, he gets six months “off” from making the monthly mortgage payment.

    Seven months later, Dad is finally back to work, and hasn’t been able to save any money during the forbearance period.

    Forbearance is lifted and servicer says, “That will be $9,000 + $1,500, which is now due”. ($10,500, total)

    Dad almost passes out and says, “WHY?”

    Servicer: “That’s the 6 months of forbearance plus the current month.”

    Dad: “I can’t do that, can we work something out?”

    Servicer: “Sure, we will spread out the $9,000 over 24 months.”

    Dad: “Phew….ok, good. What will that look like?”

    Servicer: That will be $1,875 a month for the next two years.”

    Dad: ” OMG!!! I can’t afford that.” That’s a $375 increase from my original payment.

    Servicer: “Sorry…..”

    Dad: “Can I Refinance?”

    Servicer: “No.”

    Dad: “What can I do?”

    In a nutshell, this is Forbearance, folks. Forbearance is not forgiveness.

    Please work with your lender on options available to you if you cannot make your payments — communication is key and critical. READ all the paperwork and have a full understanding before you sign & agree to anything.

    If you have questions or need a second opinion please let us know and we will be happy to connect you with a lender. We want you to understand options before you agree to any deferral of a payment.

     

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