What is a forbearance agreement?


The necessity for a forbearance agreement occurs when the borrower has defaulted with payment as agreed upon in the loan papers and the bank or other lending institution are willing to postpone taking immediate action against the borrower.

A forbearance agreement will allow a defaulting borrower to undergo a curing period agreed upon with lender that is supposed to bring his payments back on schedule. A forbearance agreement is one by which the lender agrees not to take legal action as otherwise they have the right to take.

The borrower should be acquainted with the possibilities a forbearance agreement offers towards resolving delinquencies. A forbearance agreement will help identify reasons for default and whether the default can be resolved; it will help restructure financial terms to achieve greater manageability for borrower and approved rate of return to lender.

As a whole, what a forbearance agreement essentially is - a set of rules to operate a lending partnership at times when the borrower is financially troubled.

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