What is Forebearance?
Forbearance is an arrangement that modifies the mortgage agreement between a borrower and a lender. A borrower might make interest-only payments for several months or skip payments entirely during forbearance. Late fees and credit dings can often be avoided. Once the forbearance period ends, the borrower must then repay the debt, perhaps by making larger monthly payments (a payment plan) or making regular payments and adding additional months to the end of the loan term.
Lenders and loan servicers typically decide whether to offer forbearance on a case by case basis, but with the passage of the CARES Act (the Coronavirus Aid, Relief, and Economic Security Act) in March the rules changed. If a property was financed in a way that involved the FHA, VA, USDA, Freddie Mac, or Fannie Mae then evictions and foreclosures were banned. A borrower impacted by COVID-19 can get forbearance for 180 days (about six months) plus – if requested – a 180-day extension. Many states, counties, and cities followed in quick succession with more-or-less similar bans.