No one ever plans on struggling financially, but we aren’t given the benefit of knowing what life has in store for us. If you need temporary relief from your house payment, working out a mortgage forbearance agreement with your lender is an option. Before moving forward, you should know what it entails.
A mortgage forbearance is a temporary pause in your mortgage payment. Homeowners experiencing temporary financial hardship can request a forbearance to get relief while getting their finances back on track.
Under a mortgage forbearance agreement, your lender lays out the terms under which they agree to pause your payments. It will tell you how long your forbearance is going to last as well as letting you know how the lender will handle procedures at the end of your forbearance. For example, it might stipulate that the lender or servicer will contact you a certain amount of time before the forbearance ends to go over repayment options.
In exchange for signing the formal written agreement, your lender won’t pursue foreclosure for the period of the forbearance, so you get to stay in your home as long as you comply with the terms of the agreement.
Under a mortgage forbearance agreement, payments are temporarily paused for the term of the agreement. Additionally, late payment fees and penalties are waived. If your hardship is still ongoing at the end of your forbearance period, your lender has the option to extend your forbearance.
Mortgage forbearance is not meant to be a long-term solution to financial issues, but it is meant to give you time to get back on your feet and put yourself in a more stable situation.
Two terms that are important to distinguish are mortgage forbearance and mortgage deferment. While both involve a temporary pause in mortgage payments, there are some differences in what happens after the pause is over. With mortgage forbearance, the borrowers are responsible for making up their missed payments. In the case of a deferment, the lender adds the deferred mortgage amount to the end of the loan term.
To be eligible for a forbearance, you generally must be suffering a financial hardship of some sort. An example might be the loss of a job.
It’s important to note that a forbearance is for special circumstances. You have to be experiencing a verifiable financial hardship, not just be delinquent on your payments. You need to have had a loss of income happen or other major event affecting your finances.
As an example, if you have an adjustable-rate mortgage (ARM) that you’re struggling to make payments on, this on its own wouldn’t usually qualify you for a forbearance because lenders typically qualify you for the ARM using the highest possible payment you could receive after an adjustment, so the assumption is that you should be able to afford it.
Borrowers looking to request mortgage forbearance should contact their lender or loan servicer. There's usually an application process and some servicers may require you to write a separate hardship letter explaining the circumstances surrounding your financial troubles.
Clients with loans serviced by Rocket Mortgage® who are struggling with their mortgage payments may fill out our Application for Success. No separate hardship letter is necessary.
If approved for a forbearance, the length of the payment pause depends on several factors including the nature of your hardship, the policies of your mortgage investor (Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), etc.) and occasionally even statutory requirements.
Speak with your servicer to make sure you fully understand the length of any agreed-upon forbearance.
Rocket Mortgage ® uses information about your income, assets and credit to show you which mortgage options make sense for you.
A forbearance is an option on your path to reinstate your mortgage. You have to sign a mortgage forbearance agreement letter in order to get one. The latter allows a client to be fully aware of the terms of the forbearance. Here are some things to look for:
Once your forbearance is over, you’ll have to resume making payments on your mortgage. Depending on the circumstances of your forbearance and what you qualify for, you’ll have different options to get current on your loan. These will also be dependent on the investor in your loan (Fannie Mae, Freddie Mac, FHA, U.S. Department of Agriculture (USDA), Department of Veterans Affairs (VA), etc.). Your options may include the following:
Your mortgage servicer will reach out to you near the end of the term of your forbearance to discuss potential options to get back on track moving forward.
If you’re having trouble making your mortgage payment, a mortgage forbearance agreement can put a pause on your loan payments until you can get back on your feet.
The most important thing to know is that you have to be facing an actual financial hardship in order to qualify for forbearance in most cases. The length of your forbearance can depend both on your situation and mortgage investor policies as well as statutory requirements. The repayment options and terms of your forbearance are also affected by these factors.
If you find yourself struggling to make your mortgage payment, explore some potential options for assistance so that you’re better prepared for any next steps.
Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage he freelanced for various newspapers in the Metro Detroit area.
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