Posted in Finance, Accounting and Economics Terms, Total Reads: 358
Forbearance is an additonal time provided by the loan giver to the borrower to repay his/her money/installment. It is basically a contract/terms to delay the process of Foreclosure(forcing the sale of the asset which is involved in the mortgage process).
In mortgage process many a times situtations can come in which borrower can default on his/her payment but assures the creditors that he/she will pay the same, so in simple terms forbearance is that process which enables the creditor to give some addtional time to the borrower to repay the debt.
There are various types of forbearance e.g. delaying the entire payment or just reducing the interest rates for few payments.
Forbearance is a very important step in Mortgage process as it helps rectify any issues if they arise in the mortgage process through understanding of borrowers' situation. Forbearance is more likely to be activated for a borrower if he/she is undergoing short term financial crisis vis a vis a borrower who seems to be in a long term financial crisis arising due to some situation.