What does “forbearance” mean?
August 28th, 2008 By Peter G. Miller
If you miss a mortgage payment, the lender has a right to foreclose — to sell your property and recover the loan amount plus foreclosure costs. However, lenders sometimes prefer to work out matters so that foreclosures can be avoided because a typical foreclosure action results in a $40,000 loss to the loan owner. If you can make up the missing payment and otherwise satisfy the lender it may be possible to avoid foreclosure. Not foreclosing is an act of forbearance.
In general terms, a loan modification can be seen as a act of forbearance. Rather than foreclose, the lender is willing to work out an alternative arrangement.
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