In the Beehive State, where 71.1% of homeowners have mortgage debt, the seriously delinquent rate is one of the lowest in the United States. However, many borrowers are expected to miss their future payments due to the coronavirus scare.
Fortunately, a reasonable mortgage lender in Utah could grant some financial relief to qualified individuals. A popular lifesaver the government has been pushing is forbearance. It is an option that could be given to a mortgage borrower to skip payment while avoiding the usual consequences of delinquency.
Being allowed not to pay your home loan can help you survive trying times. But it is not a cure-all. If you want to understand the nature of mortgage forbearance, let us debunk the most common misconceptions about it.
1. The Lender Would Rather Foreclose on a Mortgage
Admittedly, forbearance is not the only option mortgage lenders could use to minimize their losses due to serious delinquency. However, foreclosure is generally the move of last resort.
If you have a legitimate reason why you can’t settle your mortgage bills over a certain period, you might be granted forbearance. Its viability stems from your ability to get back on your feet fast and resume repayment at an agreed-upon date.
A lender is not necessarily motivated to foreclose on a mortgage. The process is often expensive in the part of the lender, so less costly routes are naturally explored first.
2. The Delinquent Borrow Reserves the Right to Receive Such Relief
Forbearance is a privilege. And lenders exercise their own discretion to grant it. They might be open to negotiating, but they can decline unrealistic proposals from delinquent borrowers.
If you want to get a favorable forbearance, you should be able to justify the amount of time you need to postpone repayment and prove that you will have made your promises in the future. If your argument or case is unbelievable, your lender could decline your request and opt for another way to get paid instead.
3. The Agreement Automatically Suspends Total Payments
Forbearance agreements are negotiable. Entering one does not mean you will not have to pay anything at all. Your lender might just reduce your installment and not give you a complete payment moratorium.
4. The Agreement Provides Long-term Financial Relief
From a lender’s point of view, granting forbearance means not getting paid for the time being. Since overhead is continuous, it is a decision never made lightly.
Sometimes, one lender might allow mortgage payment reduction or postponement for a few months while another could afford to wait for your money for many quarters.
5. The Agreement Has No Disadvantage to the Borrower
A forbearance could appear in your credit report, but, unlike a late payment, it will not necessarily drag down your FICO scores.
However, it could turn your mortgage upside down. You might be asked to pay for interest only, causing you to pay money without a decrease in your mortgage debt. Frozen principal does not always translate to frozen home equity too. In the case of property depreciation, you might find your loan underwater.
The favorability of a forbearance agreement is just as good as the borrower’s negotiating skill. If you play your cards right, you can ink a deal on your terms.