“The Forbearance Agreement”


What Is A Forbearance Agreement?

If you don’t qualify for the Loan Modification, then The Forbearance Agreement may be better for you. The Forbearance is a workout agreement with the bank.

Example:

Payments Behind…………………………… 10

Monthly Payment…………………………… $15,000 ($1,500 x 10)

Attorney Fees………………………………… $2,500

Total Due…………………………………….. $17,500

**Total does not include late Payments Fees or Insurance fees, if any**

Here is how a Forbearance agreement works:

The bank will always ask for attorney fees then approximately 40%-50% of the back payments.

Let’s look at this Example:

Attorney Fees…………………………………. $2,500

4 of the 10 Payments…………………………. $6,000

Total Due…………………………………….. $8,500

You need $8,500 to enter into the Forbearance agreement. The balance of the 6 payments will be processed accordingly.

You have to qualify for this. Everyone qualifies, it’s just some will pay over 12 months, some over 6 months.

Example:

Down Payments……………………….. $8,500

6 Payments / Balanced Owed………… $9,000 (6 x 1,500)

This $9,00 depending upon your monthly income will be added to your monhtly payments as follows.

Example:

$1,500 is your monthly payments you qualify for a 9 month program which means your new payment will look like this:

Old Payment…………………………. $1,500

Past Monthly Payments………………. $1,000 (x9 months)

New Monthly Payments………………. $2,500 (for next 9 months)

Then at the end of the 9 month period, your payment will go back to the original $1,500 per month.


Remember these 2 Important Points:

1.) 90% of homeowners fall out of the Forbearance agreement in the first 2-3 months, because of the failure to pay. If you are struggling to make your payments and the increased monthly payments make staying current even harder.

2.) Just because you have worked out a deal with the bank, you are not out of foreclosure. You are still in Foreclosure until your 9th payment of $2,500 is made.

Than and only then, will you get a foreclosure withdraw letter from the bank, stating your loan is current. In the meantime, the bank will keep passing the foreclosure sale date every month.


Let’s look at how this done:

Lets say today is March 26th and you make a deal with the bank on this day. They will have you a wire transfer or Wester Union your money to a special account. Do not just mail your check in, the bank will tell you where to Fed-Ex cashier’s checks if they want you to. They will not take personal or business checks at this time. The bank will require certified funds.

Let’s say today is still March 26th. You need to send your $8,500 payment to the bank. Then starting on May 1st, your payment, of the nine new payments, is due. Remember, the new payment is $2,500.

You will need to send this payment Certified Funds or however the Bank requires 3-4 days before it is due to make sure they receive it in time. You will be sending it on the 26th or 27th of every month. On the day before it is due, you need to call the bank to verify they received the money in time. This is a must. 

This is how you foreclosure sale dates will look:

Still assuming today is March 26th, you send $8,500. The sales date was April 6th. After recieving the $8,500, the bank calls the public trustee office or the foreclosure file room, (or whoever sells the foreclosures in your area) and sets a new sales date of May 6th. You make the payment on May 1st or $2,500. When the bank receives that payment, they will call and move the new sales date of June 6th. You make the June payment then the bank will move the sale date to July 6th. If you miss the July payment that was due on July 1st, on the 2nd July, YOU NO LONGER  HAVE AN AGREEMENT WITH THE BANK. Your Forbearance agreement has been voided. Your house will go to sale on July 6th, and you will get evicted.

Now you are in trouble; however, there is still hope. Let’s re-think what has happened here. You now owe the bank $7,000 from the foreclosure, plus your $1,500 for the July payment, which your basic monthly payment.

You used to owe $17,500, of which you paid $8,500 down and 2 payments of $1,000. You really paid $2,500 per month; however, $1,500 per month is for your normal May and June payments.

So you have:

Original Balance Due…………………… $17,500

Down Payment……………………….. -$8,500 (minus)

Payments (May and June)……………. -$2,000 (minus)

Due on past payments…………………. $7,000

July Payment (due)…………………… +$1,500 (add)

New Total Due………………………….. $8,500 

Let’s say today is July 3rd, you owe $7,000 from the foreclosure and $1,500 from the July 1st payment, which totals $8,500. This is your new total with the bank. Now you call the same rep from the bank and do another forbearance agreement on the $8,500. The bank will want $4,250 down, and the balance of $4,250 will be split evenly over the next 7 moths. This now makes your new payment for August $1,500 plus $607.14 or $2,107.14. Your new payment will be $2,107.14 from August 1st through February 1st.

After Feb. 1st, if all payments are made on time, this is when you are out of foreclosure and March 1st is when your old payment of $1,500 will resume. This is truly a great option for homeowners. However, this is a strict pan and you do need my assistance (or another attorney) to do this.

Remember, banks are sneaky, don’t trust what they say, everything must be in writing, before any money is sent to them.

Call me at 210-777-0567 to help. Let me show you how to work this option.


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