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.

Investopedia explains '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.



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