Even if your financial situation has become so dire that you are facing the loss of your home, you still have options. The foreclosure process, while often the only way to recover the loss on a loan, is still very expensive for a lender. In the end, its loss will be minimized, but it will still be a loss. Unless your situation has deteriorated to the point where you have no income, you may be able to work out a temporary arrangement with the bank. This type of agreement is known as forbearance. It is designed to reduce your payments to allow you time to improve your situation, bring your loan current and, ultimately, keep your home.
Contact your lender early in your delinquency or -- if possible -- even before you miss a payment. Stay in contact with its collections department until the problem is resolved.
Send a written explanation of the circumstances surrounding your delinquency. Be as detailed as possible. If you can’t work due to an injury, note that. If you are going through a divorce and have diminished assets, mention that.
Provide information supporting your situation. Include current financial statements, pay stubs, medical bills and court documents. Show the lender the seriousness of your situation.
Inform the lender how and when you intend to turn things around. Examples include going back to work, obtaining a new or second job or beginning to receive funds through alimony or child support. The more concrete time frame you can give the lender, the better your chances of getting the forbearance.
Work with the collections department to come up with a reasonable payment during the forbearance period. Don’t be so unreasonable as to think you will be paying pennies. You will have to pay as much as you can afford while still meeting basic expenses. Understand that you will have to forgo certain luxuries during this time.
Review the forbearance agreement provided by the lender. If possible, have an attorney give his professional opinion before you sign it. Once you sign and return the document, be prepared to follow it strictly. Any deviance from the agreement can trigger the foreclosure action.