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Most lenders are willing to help borrowers who find it difficult to meet their scheduled mortgage dues. Initiating foreclosure proceedings against a homeowner is expensive and demanding for a lender. Lenders look for various options until the homeowners can tide over their current financial difficulties. Here are some deferment payment options that lenders extend to their clients.
Under this plan, a lender consents to either reduce or suspend the mortgage payments of the homeowner for a specific duration. Forbearance is a practical preventive measure that a lender may allow a borrower who anticipates a difficulty in meeting mortgage payments for a brief period. After the forbearance period, the borrower will have to resume the regular payments and recompense the unpaid amounts, as well.
The Department of Housing and Urban Development (HUD) of the USA specifies that a borrower should call the mortgage lender directly after missing a mortgage repayment. This move on the part of the borrower can avert foreclosure. The Federal Trade Commission (FTC) declares that lenders often follow a repayment procedure in which a borrower can pay the missed due sum by adding small portions to the subsequent scheduled mortgage payments.
A lender may extend the term of the mortgage for a distressed borrower, in addition to allowing a few missed payments. The homeowner can continue with the subsequent mortgage repayments after a financial recovery. The lender permits the borrower to make the delinquent payments at the end of the loan period, thereby increasing the loan period. This plan is suitable for a borrower who is less than three months late on the mortgage dues.
The lender allows a borrower to miss the mortgage repayments during a financial crisis. A reinstatement involves the payment of the entire missed amount, the interest accrued and the penalties on a specific date.
The options listed above are suitable for homeowners with temporary difficulties in meeting their mortgage dues. A lender may offer an assistance program involving a balloon payment to a borrower looking for an enduring solution to mortgage repayment difficulties. A long-term way out can be a modification of the mortgage. The lender reduces the principal payments for the monthly reimbursements. This makes the monthly payments manageable for the homeowner. However, the borrower will have to resort to a balloon payment of the principal at the end of the loan term.