If a homeowner is facing a foreclosure, one may be extremely worried about losing their home, damaging their credit, and the possibility of a deficiency judgment.
However, there are options to avoid a foreclosure. A loan modification, forbearance agreement, or a repayment plan are some options designed to help homeowners facing a foreclosure. Our dedicated Miami foreclosure defense attorneys are providing insights into the differences between each to assist those staring down a foreclosure.
A loan modification permanently restructures the terms of a borrower’s mortgage in order to better afford their monthly payments. Usually, the lender may reduce the interest rate, extend the length of the mortgage term, or convert from a variable to a fixed interest rate.
To qualify for a loan modification, the borrower must explain that one cannot afford the current mortgage payment due to financial hardship, complete a trial period to show that the new monthly payment is affordable, and provide all required documents to the lender.
A forbearance agreement is different than a loan modification due to the fact that a forbearance agreement provides short-term, rather than permanent relief.
Under a forbearance agreement, the lender agrees to reduce mortgage payments for a specific period of time and to not initiate foreclosure during that time. In addition, the borrower must continue with the full mortgage payment at the end of the forbearance period and pay any additional amount in order to be current with the mortgage.
If temporary hardship causes a borrower to fall behind on mortgage payments, a forbearance agreement may be the best option to avoid a foreclosure. Unlike a repayment plan, the lender agrees for a borrower to miss or reduce the monthly mortgage payments for a certain period of time.
If a borrower has missed more than a few payments due to a temporary hardship, a repayment plan may act as a way to get up to date with the mortgage once finances are back in order. A repayment plan is an ideal way to spread the owed amount over a period of time, usually a certain number of months.
During the repayment period, a portion of the owed amount is added to each of the regular monthly mortgage payments. At the end of the period, the borrower will be up to date on their mortgage and continue paying the set monthly payment.
The length of the repayment period will depend on the amount owed and how much the borrower can afford to pay each month. Generally, a repayment plan ranges from three to six months.
Talk to An Attorney
Just the idea of facing a foreclosure can be extremely stressful for any homeowner. Prior to deciding on any of the above alternatives to foreclosure, it is vital to speak to one of our expert Miami foreclosure defense attorneys in order to achieve the best possible outcome. Contact Graham Legal, P.A. today for a no-obligation consultation!