No one is exempt from falling behind on their mortgage payments, whether the cause is a medical bill pile up, lost wages or simply money mis-management. Unfortunately, missing too many payments can lead to defaulting on the loan. Each year, millions of American homeowners go through foreclosure, and it can be an agonizing and particularly stressful time. Foreclosure, however, isn’t a picnic for the mortgage lender or servicer either. To limit the cost and the negative impact it has on business, a mortgage lender or servicer may allow forbearance. Is mortgage forbearance program a real solution, or should we consider a home equity loan alternative that is more advantageous?
What is a mortgage forbearance program?
A mortgage forbearance program is provided to give us temporary relief from making the agreed-upon monthly payments. The program allows for a lower mortgage payment to be made for a specified period, or, in some cases, no payment whatsoever. However, it does not mean that we no longer have to pay the amount due. It is not a waiver, grant or loan forgiveness. Eventually, the delinquent payments with interest must be paid, or you will be in default of the loan.
There are specific criteria to be approved for a forbearance program. These include a layoff, natural disaster, major illness or an acceptable financial hardship that prevents us from meeting our legal financial obligations. Generally, forbearance must be requested by the borrower; however, in rare circumstances, the mortgage lender or servicer will offer it as a solution. Getting approved for a forbearance program may sound as though it’s a favorable solution, but there are many flaws. The qualification process is often complex, hard to understand and extremely time-consuming.
How do borrowers qualify for a mortgage forbearance program?
Although the qualification requirements for a mortgage forbearance program are different depending on the lender, in almost all circumstances, it begins with an application. To determine if we can apply for mortgage forbearance, initial contact must be made to the mortgage lender or servicer by phone. It can be an intimidating experience, and many of us would rather forgo the undue stress and deal with the consequences of the missed payments.
While some lenders allow an online application, others require a hard-copy be sent as further verification that the information being provided is legitimate. (It’s also considered mail fraud if anyone submits false information through the mail).
Typically, borrowers are given a specific date that the application must be received by. This can greatly reduce the time you have to gather essential information, which can, in turn, affect your chances of being approved. Even if the forbearance request is due to something like a natural disaster, the borrower still usually has to submit the information within a predetermined time frame, even if that proves difficult.
Examples of the information that is generally requested include:
- Most recent mortgage statements
- Statement of current monthly income
- Statement of all expenses and liabilities
- Bank Statements
- Pay Stubs (if applicable)
- Thorough explanation of financial hardship, including supporting documents
- Any other information deemed appropriate to approve or deny
While some borrowers do qualify after submitting the above information, many won’t meet the criteria. Quite often, applicants submit the required information and supporting documentation only to be denied. Once this occurs, the lender has all the information needed to know the insolvency of the borrower’s finances, which could have a detrimental effect on refinancing with them in the future. Unfortunately, that also means time is wasted while other solutions are available that offer more advantages. Home equity loan alternatives are fast becoming the only fair way to to utilize the equity within your home.
Appeal rights are available, if you still find interest in the forbearance program, but the duty of working on it is left to a different department. Either way, unless the decision is considered an egregious error, it is unlikely to be overturned.
Does forbearance hurt or help?
It’s easy to get overwhelmed with delinquent mortgage payments, especially with so many different options available. There are isolated success stories, but most often, forbearance creates more problems than solutions.
After the immediate relief is over, borrowers are frequently left with the consequences of a regretful decision. Choosing a forbearance program does not negate the effect on our credit rating. We’re not only delaying the inevitable of still having to make up the payments and interest, but the missed payments also show on our credit report. It’s too late to avoid the negative impact, which will take many years to resolve. The delinquency can remain on your credit report for 7 years. Additionally, if approved, the forbearance will be reported to the credit reporting agencies. That hurts a homeowners’ credit profile and can affect refinancing in the future. It can even bear weight on the purchase of a new home.
A forbearance program does offer a brief pause in financial hardships, but it does not offer any solvency opportunities the way an equity program does.
Forbearance Program vs. Equity Program
A better solution, and one that may help resolve any future impact on your credit score, is the equity program offered by Skydan Equity Partners. We believe in offering peace of mind along with proven solutions that aren’t available in the traditional banking industry. Our home equity loan alternative provides exclusive benefits that are designed to give homeowners immediate relief from financial hardships. Many of the forbearance programs are outdated and still use criteria that have been in existence for many decades.
Skydan Equity Partners provides homeowners a unique opportunity to unlock up to $250,000 equity in the home, and the qualification is not based on credit score. We do not use a credit report to qualify homeowners; therefore, bad credit does not prevent anyone from gaining access to the money they need.
In addition to catching up on past due mortgage payments with a lender, qualified homeowners can use the equity program for the following reasons:
- Delinquent Property Taxes
- Credit Card Debt
- Home Improvement or Repairs
- Medical Expenses
When falling behind on mortgage payments, the first thing that most homeowners will do is complete a search for home equity loan Chicago. The downhill spiral of finding traditional lenders boasting strict rules and regulations who do not offer access to up to $250,000 equity with no credit check is a big time and money drain. The payments for our equity program can be deferred for up to two years, which is unheard of for any type of forbearance program.
Skydan Equity Partners gives hope to homeowners when banks are saying no and at a time when certainty and answers are needed the most. The last thing that anyone needs during a time of financial crisis is more obstacles to overcome.