Definition

• A mortgage forbearance is a particular type of agreement that is made between a borrower and the lender. This agreement says that the lender will not exercise its right over the property (foreclosing it to make money off of the loan), even if the borrower is delinquent in payments. This agreement only is made if the borrower also takes steps approved by the lender to continue paying the loan.
  
  

Requirements

• Typically, lenders only will allow borrowers to enter into a mortgage-forbearance agreement if they are able to make at least one immediate loan payment (to show they are able to do so) and if the missed payments are rescheduled and added back to the loan. This must be done within a specified time frame for the forbearance to continue.
  
  

Uses

• A mortgage forbearance is not a solution to a problem, nor is it a long-term fix for borrowers' revenue problems. If borrowers have long-term problems that are keeping them from making loan payments, the forbearance will not help them. It is used only for borrowers who have short-term problems, like an emergency requiring the use of extra funds, and can continue making mortgage payments afterward.
  
  

Benefits

• When a mortgage-forbearance agreement is made, it can be a good deal for both the borrower and the lender. The borrower does not have to worry about the extremely negative credit-rating effects of a defaulted mortgage and can avoid the foreclosure or short sale process completely. The lender can find a way to receive the full original payment from the mortgage without too much extra expense.
  
  

Considerations

• The borrower must still make the payments that could not be made during the time when money was tight. This means that these payments return back to the loan and may collect extra fees or interest because of their forbearance. This makes the loan more expensive for the borrower in the long term, even when it helps in the short term.