What Is A Forbearance Agreement?

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What is a forbearance agreement?

A mortgage forbearance agreement is an arrangement between you and your lender to temporarily pause or lower your mortgage payments, usually in response to a short-term financial hardship. You’ll still owe the amount you missed, usually when the forbearance period ends or at the end of your loan term.

The initial forbearance period typically lasts between three to six months. Depending on your lender and type of loan, you might be able to extend the forbearance if the hardship lasts longer than that.

A forbearance agreement can be a lifeline for temporary challenges like a job loss. It will not, however, keep you out of foreclosure if you can’t make up the payments after the forbearance period ends.

What does a standard mortgage forbearance agreement include?

Here are some of the key features of a standard mortgage forbearance agreement: 

• The length of the forbearance period
• How the missed payments will be repaid and any late fees you might be responsible for
• The amount of payment required during the forbearance period, if any
• Whether the lender will report the forbearance to the credit agencies
• Whether interest will continue to accrue on the missed payments

Keep in mind, forbearance agreements differ between mortgage lenders since they’re based on factors such as the investor requirements of your loan.

What happens after the forbearance agreement ends?

Depending on your lender or servicer, you’ll have different forbearance repayment options. You might be able to pay it all in one lump sum, tack on the payments to your existing monthly payment or defer what you owe to the end of the loan term. You might also be able to refinance your loan. If your hardship becomes permanent, you might be able to do a loan modification, which permanently changes the terms of your existing mortgage, such as the interest rate or loan term, to make the payments more affordab le.

FAQ

• Can getting a forbearance agreement hurt my credit?

  Continue to pay your mortgage until you receive a written notice that the forbearance agreement is in effect. If you don’t, your lender could report those missed payments to the credit bureaus, which could lower your credit score. Make sure to also check your credit report regularly to ensure your lender doesn’t mistakenly report catch-up payments as late ones.

• How do I get a forbearance agreement?

  To request a mortgage forbearance agreement, contact your lender or whoever services your mortgage payments. You will likely need to provide documentation (like a lay-off notice) proving that you’re experiencing financial difficulties.