The lender should always determine the objectives of leniency. What are the expectations and best scenarios the parties hope for? Does the lender have an interest in pursuing a credit relationship with this borrower? Is the liquidation of security the objective or are the guarantees valid only as an ongoing company? Are there any additional guarantees that could weigh on the borrower/guarantor? Are there environmental problems that prevent immediate execution and sale? Are there jobs that need to be saved, are there political reasons that come into play, or is training new? The borrower must decide whether to continue his activities or if he is ready to hand over the keys. While a mortgage leniency agreement offers short-term facilities for borrowers, a credit modification contract is a permanent solution for prohibitive monthly payments. With a credit change, the lender can work with the borrower to do certain things – for example, lower the interest rate. B, switch from a variable interest rate to a fixed rate or extend the term of the loan – to reduce the borrower`s monthly payments. Each lender should keep a checklist of conditions that should be set out in any leniency agreement. These conditions include: All loan training sessions, in any form they may take, such as any forced execution or other legal proceedings, should begin with a thorough review of the credit file. The leniency agreement is primarily an opportunity to correct or correct errors or omissions in credit documents. The terms of a leniency agreement are negotiated between the borrower and the lender. The possibility of such an agreement depends on the likelihood that the borrower will be able to resume monthly mortgage repayments once the temporary leniency is complete. The lender may authorize a total reduction in the borrower`s payment or only a partial reduction, depending on the size of the borrower`s needs and the lender`s confidence in the borrower`s ability to catch up at a later date. The coronavirus outbreak triggered the indulgence of Fannie Mae and Freddie Mac.

Between these two institutions, they guarantee more than two thirds of all mortgages and 95% of mortgage-backed securities. A mortgage leniency agreement is not a long-term solution for delinquent borrowers. Rather, it is aimed at borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems. Borrowers with more fundamental financial problems – such as choosing a variable rate mortgage, where the interest rate has been reduced to a level that makes monthly payments prohibitive – are usually led to seek other remedies. Historically, a lenient manner has been granted to clients in temporary or short-term financial difficulties. If the borrower has more serious problems, for example. B The return to full mortgages does not seem sustainable in the long run, so leniency is usually not a solution. Each lender probably has its own suite of leniency products. In response to COVID-19, U.S.

subsidized mortgages qualify for leniency plans under the CARES Act. These plans apply to borrowers affected by COVID-19. Some common questions are what consumer options are at the end of the leniency period and how a leniency agreement will affect my credit. At the end of the leniency period, the consumer is required to participate in a development plan, and options include updating mortgage payments, paying the loan in full, a mortgage modification plan, deferring payments until the end of the loan, or increased monthly payments to cure the delay. While it is difficult to predict your personal financial situation after the immediate crisis, it is important to note that an indulgence is not a pardon and an interest persists, and if a final work agreement is not accepted, the silos may be continued later on the lender`s line.