In a repayment plan, the borrower makes extra payments to catch up on previously missed payments. This is an option for borrowers who have experienced short-term hardships, but have recovered enough to make more than their previous mortgage payment. Note that a borrower can generally receive a three- to five-year repayment plan through a Chapter 13 bankruptcy, which may be something they want to consult a legal services provider about.
Although named as forbearance plans, FHA Informal Forbearance and Formal Forbearance function as repayment plans. The Informal Forbearance plan is an oral agreement covering a period of three months or less, during which time the borrower is expected to bring the loan current. A Formal Forbearance plan is a written agreement lasting more than three months, but fewer than six months, and here, too, the borrower must pay off all of the arrears at the end of the plan. To be eligible for a Formal Forbearance plan, the borrower’s surplus income must be greater than $300 (at least $300 after subtracting all expenses from income);15% of net income (0.15 x income after deductions); and 85% of the borrower’s surplus income (0.85 x surplus income) must be sufficient to cure the arrears within the six-month period. Unlike all other FHA loss mitigation options, to qualify for an Informal or Formal Forbearance, a delinquent borrower doesn’t need to show a loss of income or increase in expenses.
Freddie Mac allows borrowers to adopt a repayment plan in which the borrower repays all arrears within a period of one to twelve months. (FDMC Guide §§ A65.15-A65.17.) Fannie Mae also allows borrowers to repay arrears over a period of time. (FNMA Guide § VII, 404.) Generally, repayment plans are limited to a period of 12 months, but they may be extended to up to 18 or 36 months, depending on the pooling date of the loan. Contact the servicer to confirm the timeframes.