What is mortgage forbearance? | Consumer Financial Protection Bureau (2024)

FAQs

What is mortgage forbearance? | Consumer Financial Protection Bureau? ›

Forbearance is a process that can help if you're struggling to pay your mortgage. Your servicer

Mortgage forbearance is an option that allows borrowers to pause or lower their mortgage payments while dealing with a short-term crisis, such as a job loss, illness or other financial setback. This can help protect struggling borrowers from becoming delinquent with payments, as well as avoid foreclosure.

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You can request a general forbearance if you are temporarily unable to make your scheduled monthly loan payments for the following reasons: Financial difficulties. Medical expenses. Change in employment.

In most cases, forbearance won't affect your credit score. However, missed payments during the forbearance period are technically late payments because you're not adhering to the original mortgage loan agreement.

Forbearance may negatively impact your credit, but it can help you avoid foreclosure, which may be even more damaging to your credit score.

Mortgage Forbearance Length

The actual length of the forbearance is often going to depend on the nature of your hardship. Your servicer will approve an initial forbearance and subsequent extensions on a case-by-case basis. While there's no end date that applies in every situation, most last less than a year.

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Can you be denied mortgage forbearance? ›

Hard to get: If you have less-than-ideal credit (or a spotty history of timely mortgage payments, which can be a cause of reduced credit scores), your lender could deny your request for mortgage forbearance.

Under the new law, forbearance shall be granted for up to180 days at your request, and shall be extended for an additional 180 days at your request. Remember to make the second 180-day request before the end of the first forbearance period.

In total, you may be able to receive up to 12 months of forbearance. You may need proof of your financial hardship, such as recent bank statements and pay stubs, and your servicer will want to know whether your hardship is short-term (six months or less) or long-term (more than six months).

Some of the disadvantages of forbearance include: In many forbearance scenarios, interest will continue to accrue on the loan during the forbearance period, which means that the borrower will end up owing more money when they eventually have to start making payments again.

If you have a loan insured by the Federal Housing Administration (FHA) and lose your job, you might be eligible for a "special forbearance" (SFB). This program is designed to give homeowners a chance to stay in their homes until they land a new job and resume making their regular mortgage payments.

A forbearance agreement is an assurance by the lender to refrain from starting the foreclosure process for a limited period, even though it is not receiving full payments. The lender and the homeowner may agree to pause payments entirely during this time, or they may agree on a reduced payment.

Forbearance is a process that can help if you're struggling to pay your mortgage. Your servicer or lender arranges for you to temporarily pause mortgage payments or make smaller payments. You still owe the full amount, and you pay back the difference later. Forbearance can help you deal with a financial hardship.

Forbearance also means that you can avoid foreclosure for your inability to pay missed loan repayments so that you can prevent your personal assets from being seized by your lender during the period for payment relief. It also allows you to pay more critical expenses, such as rent, utilities, or medical fees.

The difference between deferment and forbearance has to do with interest accrual (accumulation). During a deferment, interest doesn't accrue on some types of loans. During a forbearance, interest accrues on all loan types.