With the COVID-19 pandemic still causing financial strains for many homeowners in California, forbearance agreements have become a popular option to help ease the burden. A forbearance agreement is a temporary agreement between a borrower and a lender to temporarily pause or reduce mortgage payments for a certain period of time.
In California, the California Homeowner Bill of Rights (HBOR) provides some protections for homeowners seeking forbearance agreements. Under the HBOR, mortgage servicers are required to provide homeowners with a single point of contact and must consider all options to avoid foreclosure, including offering forbearance agreements.
To qualify for a forbearance agreement, homeowners must demonstrate that they are experiencing financial hardship that is affecting their ability to make mortgage payments. This can include job loss, reduced income, or increased expenses due to the pandemic. Once approved, the forbearance agreement will typically last for a set period of time, such as six months, during which the homeowner will not be required to make mortgage payments.
It is important to note that a forbearance agreement is not forgiving or canceling mortgage payments. Instead, the payments will be deferred to a later date, often at the end of the loan term or in a lump sum payment. Homeowners should work with their lender to determine the best repayment plan for their individual situation.
While a forbearance agreement can provide temporary relief for homeowners struggling to make mortgage payments, it is important to understand the potential long-term impacts. Interest will continue to accrue during the forbearance period, which can result in higher overall mortgage payments over time. Additionally, a forbearance agreement may impact a homeowner`s ability to refinance or obtain new credit in the future.
If you are a homeowner in California struggling to make mortgage payments due to the pandemic, a forbearance agreement may be a viable option. It is important to work with a trusted lender and to fully understand the terms and potential consequences of any agreement. With careful planning and communication, a forbearance agreement can help provide much-needed relief during these challenging times.