A forbearance is an informal agreement between you and the bank where the bank agrees to not collect mortgage payments for a few months and you agree to someday pay these “skipped” payments. In many cases the bank agrees to then consider a payment plan on the accumulated missed payments. These options could be as follows in a three month forbearance:
1) Pay 3 months lump sum in the 4th month plus the 4th month (ie if your monthly payment is $2000.00 then you will owe 3 x $2000.00= $6000.00 plus your 4th month of $2000.00 for a total of $8,000.00 due on in month 4).
2) Give you an extended payment plan, usually between 3 -12 months to pay back the $6,000.00 you owe over time (ie in month 4 your payment will go up a few hundred dollars a month until your repayment plan is over).
3) Give you the option to apply for a loan modification (ie roll the $6,000.00 to the end of the loan).
If you read the forbearance documents carefully, you will see the word “may” throughout the offer. The bank “may” offer you a loan modification, or the bank “may” roll your late payments into the end of your mortgage. This language is extremely important. The bank is keeping all of its options open with the borrower. The bank could choose whatever option it feels is best in any given situation.
It is very possible that the bank will ask all borrowers to submit financial information in order to qualify for further assistance at the end of the forbearance period. If it turns out that the borrower could have paid and only took the opportunity not to pay, that the bank will want all of its money in one lump sum. It is also true that if the borrower truly could not pay and after the 3 months, the borrow still cannot pay that the bank will force the borrower to apply for a loan modification and then default the late payments.
You never really know.. and the law is ambiguous at best as to any new consumer rights under the new CARES ACT. My informal advice to anyone who is considering stopping mortgage payments that they seek out professional bankruptcy legal advise. There are real and successful programs in the bankruptcy courts that were established after the last mortgage collapse in 2008 that might be able to help a homeowner save their homes. Chapter 13 might be an option. Call an experienced bankruptcy lawyer for more information.