What is the difference between a mortgage modification and a mortgage forbearance? If you are not approved for one can you be approved for the other? These are two very common questions, especially given the housing market today. When a mortgage modification is approved then this modifies the terms of your mortgage. You may get lower monthly payments or a lower total mortgage balance outstanding.
A mortgage modification can be very helpful if you are facing foreclosure and going through financial difficulties. For many homeowners a mortgage modification will not be approved though. The modification denial may be caused by the lender refusing to accept less than the current amount due and monthly payment amount, or the denial may be caused by the credit rating of the homeowner and certain debt information provided.
If you are not approved for a mortgage modification there are still options available that may be able to help you keep your home. A mortgage forbearance is different from a modification. A forbearance just means that your mortgage lender is willing to avoid the foreclosure process and provide additional time to allow you to catch up on any past due mortgage payments. The original mortgage loan terms are still in place and are not changed in any way.
What happens if you are not eligible for a mortgage modification and your lender refuses your request for a forbearance though? Is there any way to prevent the loss of your home in this situation? You can file for chapter 13 bankruptcy, which will allow you to restructure your debts, and may prevent you from losing your home to the mortgage lender.
Chapter 13 can allow you to create a repayment schedule to pay off any past due mortgage amounts owed in reasonable payments, but you must also make any current mortgage payments as they come due to prevent further foreclosure efforts by your lender.
Chapter 7 bankruptcy can help you eliminate any mortgage debt owed but this form of bankruptcy will not usually help you keep your home. A mortgage is a secured loan, and if the loan terms are not met then the lender has a legal right to take the property that secures the loan. Under chapter 7 bankruptcy the property is returned to the lender and any outstanding debt that you owe is typically discharged.
If you are having problems meeting your monthly mortgage obligation and you are facing foreclosure there are a number of options that you have. You can apply for a mortgage obligation, and if this does not work out then you may qualify for a mortgage forbearance instead.
If both of these options fail then you should consult an experienced bankruptcy attorney who specializes in debt relief. A debt specialist can help you explore all of your possible options and help evaluate which option is right for your specific needs and unique situation. In some cases letting the home go may be the best choice, but in many cases it will be possible to keep your home if you act quickly once your financial problems start.