An agreement between a mortgage holder and a borrower that lays out a specific loan payment plan and puts a stop on the foreclosure action so long as the borrower meets the terms of the agreement. The payment plan includes provisions for repayment to the mortgage holder of all delinquent interest and fees and could include extending the life of the mortgage beyond its original term. A Forbearance Agreement is a tool that allows the borrower to keep the property.
However, banks only temporarily adjust the mortgage payment. As soon as the agreement expires, borrowers must be financially capable of repaying the amount of missed or decreased payments. The average duration of mortgage loan forbearance contracts is usually two to three months.
A mortgage forbearance may be a great option for all those dealing with momentary financial setbacks. Borrowers need to be extremely proactive in obtaining monetary affairs throughout the contract period to make sure they will pay for deferred payments as soon as the plan expires.
This option is very risky on the borrower’s credit score and can have great impact on escrow.