Use a Mortgage Forbearance Agreement Sample and Make Up Your Missed Payments
Job loss, severe illness, and global economic crisis are some of the main reasons why so many people experience financial hardship. As the COVID-19 pandemic keeps taking its toll on the economy, more and more homeowners are considering forbearance plans.
If you are worried about making your monthly mortgage payment, you should consider drawing up a forbearance agreement. Considering that money is probably tight, hiring a lawyer to draw up a contract would not be the best option. Luckily, we have a better idea!
Find out how to write a contract on your own by using a mortgage forbearance agreement sample!
Mortgage Forbearance Agreement in a Nutshell
A mortgage forbearance agreement is a legally binding contract between a:
- Mortgage lender—A bank or a financial institution that offers and administers home loans
- Delinquent borrower—A person or organization late or overdue on a loan payment
By signing this legal document, the lender agrees not to initiate the foreclosure procedure, provided that the borrower has valid proof of financial hardship that led to late payments.
The agreement does not absolve the borrower from obligations in the original loan agreement—it is a temporary financial relief. The contract should state how and when the borrower is going to make up the deficit in payments, including taxes, principal, interest, and insurance.
Besides making a forbearance agreement, you should consider some of the following options to deal with overdue mortgage payments:
- Debt settlement
- Loan refinancing plan
- Debt management programs
- Loan modification
- Coronavirus mortgage relief
Are There Any Requirements for a Mortgage Forbearance?
To sign a mortgage forbearance agreement with the lender, you have to follow their set of rules. While some financial institutions may have some more specific requirements, usually you have to:
- Show proof of financial difficulties
- Provide evidence that the hardship is temporary
- Give an assurance that you’ll be able to continue payments on time
- Guarantee that you’ll repay all the missed payments—including interests—at the end of the forbearance term
What Should a Mortgage Forbearance Agreement Sample Include?
Writing a mortgage forbearance agreement can be a tricky task. You can use a ready-made contract template, but keep in mind that the terms and provisions can vary significantly from one case to another.
A standard mortgage forbearance agreement sample should contain the following:
- Names of the parties
- Cause of the agreement
- Description of defaults
- Acknowledgment of debt
- Drop-dead date or termination term
- Date of agreement
- Signatures of both parties
Aside from these general provisions, the contract should identify:
- Existing loan documents
- Security agreements and guarantees
- Past due taxes
- Amount due on the obligations
- Events of default (failure to pay and perform)
- Remedies upon default
Mortgage Forbearance Agreement Ended—What Now?
Forbearance does not last longer than 12 months. After that period, you should be able to get back on track with making regular monthly mortgage payments. You are also expected to make up the delinquent payments, but the lender should never require you to pay them all at once.
Some time before the forbearance ends—usually a month before—you get to discuss the situation with your mortgage servicer and define the next steps according to the circumstances.
Is a Mortgage Forbearance Agreement the Only Way To Avoid Foreclosure?
Fortunately, it’s not. When you find out you’re unable to make the next mortgage payment, you should inspect the problem from different angles. You can check out your options in the following table:
|Mortgage Forbearance Alternative||How Does It Work?|
|Reinstatement||This option is considered only if the borrower is financially stable and willing to do it. Reinstatement refers to paying the complete forbearance amount at once|
|Repayment plan||A repayment plan allows you to make additional monthly payments on top of your regular ones to repay the forbearance amount|
|Loan modification||With a loan modification, the terms of the original loan are permanently changed in your favor. This means that the terms are more manageable and the monthly payments are lower. This option includes a trial period—making trial on-time payments for a few months to make sure you can afford the modified plan|
|Loan refinancing plan||You can lower your mortgage by making bigger payments each month. This way, you’ll shorten the payment term and save a lot of money on interest|
|COVID-19 payment deferral||If your financial hardship is caused—directly or indirectly—by COVID-19, you are eligible for a forbearance up to a year. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you can get a federally backed mortgage loan made by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), or Fannie Mae and Freddie Mac|
DoNotPay Can Draw Up Legal Documents for You
No, hiring lawyers is not the only way to create legal documents. You don’t have to spend that much money on legal assistance or time on finding online contract templates—sign up for DoNotPay and follow these steps to draft legal documents in a jiffy:
- Type in the name of the document
- Answer our chatbot’s questions
We will generate a contract, which you can later fax to other parties with our Online Fax service or get notarized using the Notarize Any Document tool.
Which Documents Can DoNotPay Create?
Once you access DoNotPay, you can create a variety of contracts and other legal documents, such as:
- Non-disclosure agreement
- Independent contractor agreement
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- Quitclaim deed
- Promissory note
- General affidavit
- Estoppel certificate
- Intent to purchase real estate
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