Definitions

Forbearance

for·bear·ance

Forbearance is a formal agreement with your loan servicer that allows you to temporarily skip or pay a reduced mortgage payment during financial hardship without the threat of foreclosure. The keyword here is temporarily. At the end of the agreement, you must negotiate a plan to catch up.

Reasons to consider it

  • It allows you to keep your house and avoid foreclosure.
  • Forbearance typically lasts for 180 days, but some borrowers may qualify for an additional 180 days under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
  • It’s easy to qualify for and gives you time to address your financial situation.
  • Under the CARES Act, lenders are advised not to require borrowers who received a COVID-19 forbearance to pay back their missed payments with a lump sum and to instead offer a repayment plan or other loss mitigation option.
  • Under the CARES Act, lenders are advised to report accounts as “current” (not “delinquent”) to credit reports while borrowers are in a COVID-19 forbearance.

Reasons to pause

  • Honestly, forbearance is a pretty big deal for homeowners. You’ll want as much clarity as possible from your loan servicer before you head into it.
  • Forbearance is most often given to homeowners with a history of on-time payments who can prove their difficulty is a short-term problem, like a temporary lapse in income due to something like a workplace injury, a reduction in income due to COVID-19 or job loss.
  • The unpaid portion of your mortgage will still accrue and you’ll need to pay that money back through a form of loss mitigation.
  • In non-crisis circumstances, some lenders may continue to charge late fees during a forbearance period, report your missed payments to your credit, and/or require missed payments to be paid back in a lump sum.

What does it look like?

  • First, check your mortgage bill for the contact information for your specific loan servicer.
  • Contact your servicer and request the forbearance. Be sure to get all the details upfront so you know what you’re getting into and what’s expected of you.
  • Before your forbearance period ends, contact your loan servicer again to assess loss mitigation options to make up your missed payments.
  • A borrower can end their forbearance at any time, so contact the servicer as soon as your financial hardship is resolved.
  • The road out of forbearance isn’t the same for everyone. It will depend on your unique situation and what your loan servicer is willing to offer, and you will come up with a plan together.
  • If you’re struggling to understand anything regarding forbearance or other loss mitigation options, or need help communicating with your loan servicer, free housing counselors are available.

Wondering if mortgage forbearance is the right choice for you? Here are some more resources to inform your decisions: