Every month, several individuals in different states often face default mortgage payments, which may be due to a temporary issue or something more long-term, such as sudden loss of a job. This stops them from keeping up with their mortgage payments for a long time, and eventually, the lender has no choice but to take proper actions that will lead to foreclosure of the property.
However, foreclosure is an extreme condition that can be avoided most of the time. The principal reason most debtors face foreclosure is because of a lack of communication with their lenders. They tend to stay away from them out of fear that they might ask for their payment when the borrower has nothing to offer. Of a truth, this is not usually the case, as reaching out offers the debtor several options, some of which will be considered here.
Forbearance is one of the first strategies implemented by most lenders when the homeowner finally reaches out. Forbearance is an agreement involving both parties, in which the lender agrees to reduce or allow the temporary stop of the mortgage payment for some time, usually three or six months. After this period elapses, the borrower will have to pay the total amount owed back and the interests attached to it.
As good as this option might sound; it might become burdensome for the debtor, especially one who does not even know if their financial crisis would have been settled within this period. Instead of forbearance, both the lender and the borrower, which can favor both parties, can consider other options.
REPAYMENT PLAN: A repayment plan involves the lender dividing the payments missed by the debtor into future months so that the debtor does not have to pay all at once. This means that the mortgage for the subsequent months will only slightly increase until the borrower can make payment for the missed months. This can be a better option for someone who defaulted due to a temporary condition and can easily bounce back. Most times, the lender also removes whatever fees attached to all the missed months to make it easier for the debtor to make payment.
REINSTATEMENT: This also involves an agreement between the lender and the borrower to make payment at a certain time. What makes this different from forbearance is that the borrower is not seeking an extension; instead, would love to pay the total sum missed at an agreed time. This is another strategy that works for people who believe they can bounce back easily from the debt.
Those who are having a serious crisis and are unsure of how soon they will recover, instead of waiting for a looming foreclosure or getting a bad credit score every month, the lender than consider the short sales or deed-in-lieu of foreclosure options. These will help the person get out of the trouble of debt and maintain a fair credit score; while seeking other loan and housing opportunities.