ContractsCounsel Logo

Forbearance Agreement

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 9,835 reviews
No Upfront Payment Required, Pay Only If You Hire.
Home Types of Contracts Forbearance Agreement

Jump to Section

What Is a Forbearance Agreement?

A forbearance agreement is made between a mortgage lender and a borrower that has gone delinquent on the repayment terms. In this agreement, the lender agrees not to foreclose on the mortgage, while the delinquent borrower agrees to a revised mortgage plan that will bring them current on the owed payments. A mortgage forbearance agreement will often suspend or reduce the payments for a period of time, allowing the borrower to fulfill the mortgage obligation without having the property foreclosed on by the lender.

If you have ever wondered what a mortgage forbearance is, understanding how this option works may benefit you if you struggle to make your monthly mortgage payments due to a financial struggle. A mortgage forbearance agreement can be a viable short-term solution to a financial challenge, but the borrower must follow the timeline and adhere to the guidelines to avoid foreclosure on the property.

Mortgage Forbearance Requirements

In order to qualify for home loan forbearance, a borrower must meet certain criteria. They must be able to provide the financial hardship they have encountered, whether due to the loss of income, a disaster that has damaged or destroyed the property, or a health problem that has impacted their financial situation. The borrower must be able to submit proof of the hardship that has affected their ability to repay the mortgage loan. Some lenders also require borrowers to request mortgage forbearance within a certain number of days or weeks after the hardship has occurred.

A lender may request proof of financial hardship, so it's helpful to gather any necessary documentation before beginning the forbearance process. The borrower may need to provide:

  • Mortgage statements
  • Additional debt statements (Auto loans, student loans, additional mortgage loans, credit card statements)
  • Income details (Tax returns, pay stubs, proof of other income)

What Is a Forbearance Plan?

If you have trouble making the agreed-upon payments on your mortgage loan due to a job loss, change in employment, health issue, or another problematic financial situation, you may qualify with your lender for a mortgage forbearance plan. The lender will create this plan, which includes an agreement on their end to not foreclose on your property as long as you agree to repay the loan on adjusted terms. During the forbearance period, the lender legally cannot foreclose on the property unless you do not meet your end of the agreement.

A forbearance plan may pause the monthly payments entirely or adjust the payment amount required. At the end of the period, the borrower must resume the full payment as agreed upon in the forbearance agreement. Additionally, the borrower will often have to pay an additional fee to become current on the payments missed during the forbearance period. This additional amount includes any applicable taxes and insurance, as well as the principal and interest.

Here is an example of a forbearance agreement, provided by the SEC.


Get Free Bids to Compare

Leverage our network of lawyers, request free bids, and find the right lawyer for the job.

Get Bids Now

Benefits of Mortgage Forbearance

If a borrower is on the verge of missing a payment or multiple payments, this can create a financial problem that impacts their credit score. Missing multiple payments can also result in a foreclosure, which damages the credit score and leaves the borrower without a place to live.

Mortgage forbearance is less damaging to the credit score than a foreclosure and can create a plan that allows the borrower to get back on track in repaying the loan. Some lenders agree not to report on the missed payments under a forbearance agreement, so the borrower's credit isn't impacted. When a short-term or temporary challenge arises, a borrower can use this option to suspend or lower the payment, providing time to improve their financial situation and resolve the issue.

Mortgage Forbearance Length

Mortgage forbearance is designed to be a short-term solution for temporary financial struggles experienced by the borrower. The length of the forbearance agreement mortgage ultimately depends on the lender and the terms of the loan, and there isn't a one-size-fits-all option because of the different factors in play. The lender, type of loan, and investor or owner requirements in the loan can all impact the forbearance options available to the borrower.

One example of a mortgage forbearance plan is a six-month paused payment option, which allows the borrower to stop paying on the mortgage for six months. However, this option often requires the borrower to pay the six months of mortgage payments at the end of the term, resulting in one large forbearance payment coming due. Interest on the paused amounts also continues to accrue.

A lender may be able to assist a borrower with a solution that adds the owed payments during the paused period to the end of the loan. Some borrowers choose to take out an additional loan to cover the owed payments, although this option depends on the borrower's financial situation and credit history.

If a borrower is able to pay something, a lender may offer a mortgage forbearance reduction plan, which lessens the amount due each month. In this case, the amount reduced could be spread out over a longer-term period, such as over 12 months, thus increasing the mortgage payment amount for that period of time.

Forbearance agreement

Image via Unsplash by mari

Mortgage Forbearance Agreement vs. Loan Modification

A forbearance agreement differs from a loan modification in that the agreement is only for a short period of time. A loan modification is an option for borrowers who are unable to afford their monthly payment due to a change in the interest rate or other aspect of the loan, not due to a financial hardship that may be a short-term problem for the borrower.

A loan modification agreement allows the lender to work with the borrower to reduce the monthly payments going forward by:

  • Reducing the interest rate
  • Extending the length of the term of the loan
  • Converting a variable interest rate to a fixed interest rate

These options available to borrowers are meant to help those who aren't able to make their monthly payments, creating a permanent solution to an ongoing financial problem. In order to qualify for a loan modification, a borrower must demonstrate an inability to make the current payment on the mortgage loan due to financial hardship, as well as provide proof that they would be able to afford the modified monthly payment amount. This demonstration of the ability to pay often comes in the form of a trial period.

Lenders considering a loan modification will also require documentation, which may include:

  • Financial statements
  • Tax returns
  • Bank statements
  • Proof of income
  • Statement of financial hardship

A lender may also offer a loan modification as an option at the end of the mortgage forbearance period if the borrower is eligible.

How To Request Mortgage Forbearance

A borrower can request information about mortgage forbearance by contacting the lender and asking for additional details and options available to them under the terms of the loan. Some lenders require that the forbearance process be started within a certain period of time after a qualifying event, such as a disaster, health problem, or job loss.

The federally funded “Hardest Hit Fund” also provides assistance to homeowners throughout the U.S. It may include options like a reduction in the principal amount owed, assistance in transitioning out of a home into a more affordable living situation, or mortgage payment assistance for those who are underemployed or unemployed. Here is additional information about the Hardest Hit Fund by state.

The purpose behind a forbearance plan is to help the borrower avoid foreclosure during a temporary financial hardship that renders them unable to make the monthly payments on the loan. This article provides additional detail on mortgage forbearance agreements. When drafting a forbearance agreement, consult with a lawyer to ensure it covers all necessary elements.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Forbearance Agreement Lawyers

Donya G. on ContractsCounsel
View Donya
4.9 (59)
Member Since:
July 11, 2020

Donya G.

Contract, E-Commerce Attorney & Dispute Resolution Specialists
Free Consultation
United States
24 Yrs Experience
Licensed in CT, NY
Pace University School of Law

I am a licensed and active NY and CT Contracts Attorney, with over 20 years of diverse legal and business experience. I specialize in reviewing, drafting and negotiating commercial agreements. My practice focuses on working with small business clients as well as clients from international brokerage firms on acquisitions, especially in the Ecommerce space; drafting, negotiating, reviewing and advising on business agreements; ; breach of contract issues, contract disputes and arbitration. I am licensed to practice in New York and Connecticut, and am a FINRA and NCDS Arbitrator. My experience includes serving as General Counsel to small businesses. This entails reviewing, updating and drafting contracts such as employments agreements, asset purchase agreements, master services agreements, operating agreements and a variety of business and commercial contracts. Additionally, I assist clients with business strategies, contract disputes and arbitration. My diverse experience allows me to give my clients a well-rounded approach to the issues they face. I have been at top AML law firms; a Vice President at an Investment Bank, a Civil Court Arbitrator presiding over cases in contract law, commercial law, a Hearing Officer, presiding over cases and rendering written decisions, and a Judicial Clerk to a Civil Court Judge. It would be a privilege to assist you and your business with my services.

Daehoon P. on ContractsCounsel
View Daehoon
4.8 (111)
Member Since:
November 26, 2021

Daehoon P.

Corporate Lawyer
Free Consultation
New York, NY
9 Yrs Experience
Licensed in NY
American University Washington College of Law

Advised startups and established corporations on a wide range of commercial and corporate matters, including VC funding, technology law, and M&A. Commercial and Corporate Matters • Advised companies on commercial and corporate matters and drafted corporate documents and commercial agreements—including but not limited to —Convertible Note, SAFE, Promissory Note, Terms and Conditions, SaaS Agreement, Employment Agreement, Contractor Agreement, Joint Venture Agreement, Stock Purchase Agreement, Asset Purchase Agreement, Shareholders Agreement, Partnership Agreement, Franchise Agreement, License Agreement, and Financing Agreement. • Drafted and revised internal regulations of joint venture companies (board of directors, employment, office organization, discretional duty, internal control, accounting, fund management, etc.) • Advised JVs on corporate structuring and other legal matters • Advised startups on VC funding Employment Matters • Drafted a wide range of employment agreements, including dental associate agreements, physician employment agreements, startup employment agreements, and executive employment agreements. • Advised clients on complex employment law matters and drafted employment agreements, dispute settlement agreements, and severance agreements. General Counsel • As outside general counsel, I advised startups on ICOs, securities law, business licenses, regulatory compliance, and other commercial and corporate matters. • Drafted or analyzed coin or token sale agreements for global ICOs. • Assisted clients with corporate formations, including filing incorporation documents and foreign corporation registrations, drafting operating and partnership agreements, and creating articles of incorporation and bylaws. Dispute Resolution • Conducted legal research, and document review, and drafted pleadings, motions, and other trial documents. • Advised the client on strategic approaches to discovery proceedings and settlement negotiation. • Advised clients on employment dispute settlements.

Kelynn P. on ContractsCounsel
View Kelynn
5.0 (1)
Member Since:
August 29, 2023

Kelynn P.

Attorney
Free Consultation
Washington, DC
6 Yrs Experience
Licensed in OH
Cleveland State School of Law

Kelynn was born and raised in Cleveland, Ohio. She attended Spelman College in Atlanta, Georgia where she earned a Bachelor of Arts in Philosophy, and thereafter returned to Cleveland for law school . She earned her Juris Doctor at Cleveland State University - Cleveland Marshall College of Law. She primarily practices insurance defense and civil litigation. She has also practiced in a variety of other areas including family law, contract disputes, contract review, complex civil litigation, medical malpractice, products liability, and mass tort.

Laura B. on ContractsCounsel
View Laura
4.0 (4)
Member Since:
October 6, 2023

Laura B.

Attorney
Free Consultation
Oakland, CA
3 Yrs Experience
Licensed in CA
UC Davis School of Law

I received my undergraduate degree from Columbia University and my JD from UC Davis School of Law. I specialize in drafting, reviewing, and litigating contracts, general civil litigation, restraining orders, and family law. I have helped entrepreneurs form their business entities and grow their small businesses. This area of my practice has focused heavily on YouTubers, podcasters, and individuals creating unique online platforms. In the family law context, I have helped my clients petition for and obtain custody of their children and modify existing custody arrangements.

Austin R. on ContractsCounsel
View Austin
Member Since:
August 22, 2023

Austin R.

Attorney
Free Consultation
Texas
2 Yrs Experience
Licensed in TX
St Mary's University School of Law

Howdy', I've done employment contracts, software development contracts, and everything else including automotive financing deals and even booth agreements for hair and beauty salons.

Ryan C. on ContractsCounsel
View Ryan
Member Since:
August 26, 2023

Ryan C.

Founder & Managing Attorney
Free Consultation
Denver, Colorado
17 Yrs Experience
Licensed in CO
University of California, Davis

Ryan Clement, the Principal Attorney at Business and Technology Legal Group (www.businessandtechlawyers.com), has been a Colorado licensed attorney for almost 20 years and has extensive experience in all matters related to corporate law, software and technology law, intellectual property, data privacy and security, business startups/formation, commercial transactional matters, general business counsel, compliance, and litigation. Ryan graduated with high honors from the University of California, Santa Barbara before attending the University of California, Davis School of Law and graduating in 2004. Post-law school, he completed an esteemed two-year judicial clerkship at the Second Judicial District Court of Nevada. In 2007, Ryan Clement became a licensed attorney in private practice, working at several prestigious law firms before forming and operating his own successful law firm in 2012 at the age of only 31. This keen business acumen and entrepreneurial drive was the impetus behind Ryan’s desire to practice business and technology law, ultimately forming the foundation of Business and Technology Legal Group. In addition to his top-tier legal credentials, Ryan also holds a Master of Business Administration (MBA) degree from the University of Colorado, Denver, and has over a decade of experience working in the software industry at Fortune 500 and publicly traded companies. This vast experience in the technology and software sector, combined with his many years as an attorney provides the intersection of legal, technical, and business skill sets that sets Ryan apart from the crowd of business and technology attorneys in the market.

Veronica B. on ContractsCounsel
View Veronica
Member Since:
August 27, 2023

Veronica B.

Attorney
Free Consultation
Haddonfield, NJ
36 Yrs Experience
Licensed in NJ, PA
Widener University School of Law

I am fully licensed attorney in New Jersey & Pennsylvania. Practicing law for 29+ yrs, I've tried over civil 120 jury trials; as Plaintiff & Defendant. My success rate is 85%. People need a practical, common sense approach to solving legal issues. I have assisted in establishing 226 businesses in over 22 countries, my experience runs gamut of reviewing commercial contracts for completeness & legal protection for the parties. I have procured & drafted contracts & agreements for municipalities, charitable organizations, start ups & more. I manage 3 LLC's in Florida. Wills & Estates is another practice area. The best way to get to know me & my legal services is to reach out & start a conversation.

Find the best lawyer for your project

Browse Lawyers Now

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Financial lawyers by top cities
See All Financial Lawyers
Forbearance Agreement lawyers by city
See All Forbearance Agreement Lawyers

ContractsCounsel User

Recent Project:
Need to k ow if this is appropriate
Location: Michigan
Turnaround: Less than a week
Service: Contract Review
Doc Type: Forbearance Agreement
Page Count: 3
Number of Bids: 1
Bid Range: $465

ContractsCounsel User

Recent Project:
Forbearance Agreement
Location: Texas
Turnaround: Less than a week
Service: Contract Review
Doc Type: Forbearance Agreement
Page Count: 15
Number of Bids: 3
Bid Range: $600 - $1,250
related contracts
See More Contracts
other helpful articles

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city