Forbearance

DEFINITION of 'Forbearance'

A temporary postponement of mortgage payments. Forbearance is a form of repayment relief granted by the lender or creditor in lieu of forcing a property into foreclosure.

BREAKING DOWN 'Forbearance'

Forbearance provides the borrower time to repay delinquent mortgage sums. Loan owners and loan insurers may be willing to negotiate forbearance options because the losses generated by property foreclosure typically fall on them. Loan servicers may be less willing to work with borrowers on forbearance relief because they do not bear as much financial risk.

The terms of a forbearance agreement are negotiated between the borrower and lender, and the opportunity of such an agreement depends on the likelihood that the borrower will be able to resume monthly mortgage repayments once the temporary forbearance is over.

Borrowers with a history of making payments on time are more likely to be granted this option. The borrower must also demonstrate cause for repayment postponement, such as financial difficulties associated with a major illness or the loss of a job.

RELATED TERMS
  1. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  2. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
  3. Non-REO Foreclosure

    A real estate property that has been foreclosed successfully. ...
  4. Creditor

    An entity (person or institution) that extends credit by giving ...
  5. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  6. Impaired Credit

    A deterioration in the creditworthiness of an individual or entity. ...
Related Articles
  1. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  2. Budgeting

    Are The Volunteer Corps Right For You?

    The Peace Corps and AmeriCorps offer low pay, but they offer higher benefits down the road.
  3. Options & Futures

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  4. Investing Basics

    The Complete Guide to Financing an Investment Property

    If you're considering adding an investment property to your portfolio, you need to know what your options are for financing its purchase.
  5. Credit & Loans

    New Rules May Make It Easier to Get a Mortgage

    Fannie Mae and Freddie Mac have come to terms with lenders on how to solve mortgage disputes. This could be good news for people with lower credit ratings.
  6. Retirement

    Best Mortgage Companies Friendly to Retirees

    If you’re no longer in the workforce and need a loan to buy a home, which companies are the most welcoming? Plus, good news about qualifying for a loan.
  7. Credit & Loans

    Don't Get Overcharged for Your Mortgage

    Don't pay more for a mortgage than necessary. Here’s a quick look at the different categories and how to be sure you're getting the best deal.
  8. Credit & Loans

    What is an Alt-A Mortgage?

    Called "liar loans" for their low documentation requirements, Alt-A mortgages were hot until the subprime crisis. Now Wall Street wants to bring them back.
  9. Home & Auto

    Rent-To-Own Homes: How The Process Works

    A rent-to-own agreement can benefit homebuyers with bad credit or insufficient funds for a down payment. Here’s how one works.
  10. Investing Basics

    10 Habits Of Successful Real Estate Investors

    Enjoying long-term success in real estate investing requires certain habits. Here are 10 that effective real estate investors share.
RELATED FAQS
  1. Can Sallie Mae loans be forgiven?

    Sallie Mae loans, similar to other private loans, cannot be forgiven. As of 2015, there is no option for private student ... Read Full Answer >>
  2. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  3. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  4. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  5. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  6. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center