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Most mortgage lenders will initially try to entice borrowers with a “forbearance agreement.” This type of arrangement calls for the borrower to “catch up” the back payments, fees, and interest over a very short period of time (usually three to twelve months). The result is a much higher monthly mortgage payment. Additionally, lenders usually ask for a large lump sum up front to initiate a forbearance agreement.
A forbearance agreement with the mortgage lender's loss mitigation department usually does not take the borrower out of foreclosure at all, but rather simply causes the bank to “postpone” or “continue” the foreclosure sale until the payments are completely caught up. If the borrower does not comply with the exact terms of the forbearance agreement (a few days late, a few dollars short), the foreclosure sale takes place immediately (often within days).
Forbearance agreements are essentially a way for mortgage lenders to squeeze more money out of a borrower through the loose Tennessee foreclosure laws before they foreclose anyway under the disguise of a “workout plan.” Forbearance agreements are stacked against the borrower and almost always result in foreclosure. Most borrowers would even be better off with a Tennessee bad credit mortgage loan or a Tennessee mortgage refinance than a forbearance agreement. Many of the Tennessee bankruptcy cases filed by this office are the result of borrowers entering into forbearance agreements with mortgage lenders without understanding the implications.
