Forbearance
Definition and meaning of Forbearance in real estate.
Forbearance is a temporary agreement between a lender and a borrower that allows the borrower to reduce or pause their mortgage payments for a specified period due to financial hardship.
In more detail
This arrangement is designed to help borrowers avoid default and foreclosure during temporary crises, such as a job loss, medical emergency, or natural disaster. During the forbearance period, the lender agrees not to initiate foreclosure proceedings, but interest continues to accrue on the unpaid loan balance.
Once the forbearance period ends, the borrower must repay the skipped payments, either through a lump sum, a payment plan, or a loan modification. Homeowners should contact their servicer immediately when they fall behind to explore this option, as it is not an automatic right.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Purpose | Avoid default and foreclosure during temporary hardship |
| Accrued interest | Interest typically continues to build during the pause |
| Repayment requirement | Paused payments must be paid back later |
A homeowner who loses their job in a factory closure applies for mortgage forbearance, and the lender agrees to pause their monthly payments for six months while they search for new employment.
Frequently asked questions
Does mortgage forbearance forgive the payments that were missed?
No, forbearance only delays the payments, and the borrower is still fully responsible for repaying the missed amounts once the agreement ends.
How does forbearance affect a borrower's credit score?
Lenders typically report loans in forbearance as current if the borrower complies with the agreement, meaning it does not damage credit scores as much as a default or foreclosure.
Related terms
Sources & references
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