Forbearance

AAA

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.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Non-REO Foreclosure

    A real estate property that has been foreclosed successfully. ...
  3. Loan Modification

    A modification to an existing loan made by a lender in response ...
  4. Accord And Satisfaction

    A legal contract whereby two parties agree to discharge a tort ...
  5. Bankruptcy

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

    1. A contractual agreement in which a borrower receives something ...
Related Articles
  1. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

  2. Are The Volunteer Corps Right For You?
    Budgeting

    Are The Volunteer Corps Right For You?

  3. Saving Your Home From Foreclosure
    Options & Futures

    Saving Your Home From Foreclosure

  4. 10 Steps For First-Time Home Buyers
    Home & Auto

    10 Steps For First-Time Home Buyers

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center