How to prevent foreclosure - Forbearance (Catch-up Payments)

One of the ways to prevent foreclosure in California is with the use of "forbearance" or catch-up payments.

Forbearance is an agreement between the lender and the borrower that allows extra payments or higher payments to be made until the mortgage payments are up-to-date. This option is ideal if the homeowner is behind in his or her payments due to a temporary lapse in income or employment. It is a straightforward way to avoid foreclosure in California, provided the higher payments are affordable.

To obtain a forbearance in California (and to thus avoid foreclosure), the homeowner must speak to the lender to discuss the option.  The lender will want to know:

• How much in back-payments the homeowner can afford (in addition to the regular monthly payments.)
• Details of their family budget, which should be used to justify the request. 

Legitimate lenders do not want to undergo the foreclosure process if at all possible, and will help homeowners prevent foreclosure. Lenders want to avoid the direct losses that will occur if the property cannot be sold for more than the loan amount as a result of foreclosure.

Catch-up payments are better than direct losses from foreclosure

There is also an indirect loss (to the lender) which the homeowner can use to their advantage as they determine the best ways to avoid foreclosing on their property. If the lender has too many non-performing loans this can and does affect their financial rating, reserve requirements, and increases their cost of securing lend-able funds for their company.  As a result, many lenders are willing to discuss a forbearance plan with the homeowner as an alternative to foreclosure.