Forbearance Explained: What It Is, How It Works, and When to Use It

What Is Forbearance and How Does It Work?

Forbearance is an agreement between you and your mortgage servicer that temporarily reduces or suspends your monthly mortgage payments. It is designed for homeowners experiencing a short-term hardship who expect to resume full payments in the future.

During forbearance, your loan is not considered delinquent, but the missed payments still technically accrue. The servicer agrees not to initiate foreclosure while the forbearance agreement is in place and you are meeting its terms.

It is important to understand that forbearance does not eliminate your obligation to repay. The missed amounts must eventually be repaid according to the terms of your forbearance plan.

Types of Forbearance

COVID-Era Forbearance

During the COVID-19 pandemic, the CARES Act provided special forbearance rights for homeowners with federally backed mortgages. These could be requested for up to 180 days initially, with extensions up to 360 days total. Many of these programs have ended, but some residual options may still be available depending on your loan type.

Hardship Forbearance

Standard hardship forbearance is available for homeowners experiencing financial difficulty due to specific events such as job loss, reduced income, medical emergencies, divorce, or death of a family member. The typical initial term is 3 to 6 months, with possible extensions. Each servicer has its own eligibility criteria.

Disaster Forbearance

If you live in an area affected by a federally declared natural disaster, you may qualify for disaster forbearance. This is especially relevant in Florida due to hurricanes. Disaster forbearance typically allows for 90 to 180 days of reduced or suspended payments. FHA and VA loans have specific disaster forbearance provisions.

How Payments Are Handled After Forbearance

When forbearance ends, you must repay the missed payments. The repayment method depends on your loan type and the terms of your forbearance agreement. Common options include:

• Lump sum (balloon payment): Pay all missed payments at once when forbearance ends. This option may be difficult for many homeowners.
• Repayment plan: Spread the missed payments over a period of time, typically 6 to 12 months, in addition to your regular monthly payment.
• Loan modification: Permanently change the loan terms to make up the missed payments, such as adding them to the principal balance or extending the loan term.
• Extension: Add the forbearance period to the end of the loan term, pushing out the maturity date.
• Partial claim (FHA loans): The FHA may advance funds to bring your loan current, creating a second lien that may be interest-free and due only when you sell or refinance.

Credit Impact of Forbearance

This is one of the most important things to understand. Entering into a forbearance agreement does not directly damage your credit, because you made an agreement with the servicer. However:

• Before forbearance: If you missed payments before requesting forbearance, those late payments have already been reported and may have affected your score.
• During forbearance: Payments are reported as agreed under the forbearance plan, which generally means no negative credit reporting.
• After forbearance: If you exit forbearance and cannot resume payments or negotiate a resolution, missed payments will be reported going forward.

COVID-era forbearance under the CARES Act had specific protections that prevented negative credit reporting. Standard hardship forbearance may not have the same protections. Ask your servicer how they report forbearance before agreeing to any plan.

How to Request Forbearance

Steps to request forbearance:

• Contact your mortgage servicer directly. The phone number is on your monthly statement.
• Explain your hardship situation clearly. Be prepared to describe what happened, when it started, and how long you expect it to last.
• Request a specific forbearance term. Common requests are 3 or 6 months.
• Ask what repayment options will be available when forbearance ends.
• Get the agreement in writing. Verbal agreements may not be honored.
• Confirm how your credit will be reported during forbearance.

What Happens When Forbearance Ends

The end of forbearance is a critical moment. You will need to resume making payments, and you must also address the missed payments. Options include:

• If you can resume full payments: Work with the servicer on a repayment plan or loan modification to handle the missed amounts.
• If you still cannot pay: You may qualify for an extension of forbearance, a loan modification, or other loss mitigation options.
• If your situation has permanently changed: Selling the home, pursuing a short sale, or discussing alternative options may be the right path.

Do not wait until the last month of forbearance to plan your next steps. Start the conversation with your servicer at least 30 to 60 days before forbearance ends.

Transitioning From Forbearance to Other Options

Forbearance is often a bridge to another solution. Common transitions include:

• Forbearance to loan modification: If your hardship is permanent, a loan modification may lower your payment and add missed amounts to the loan balance.
• Forbearance to repayment plan: If your hardship has ended, a repayment plan spreads missed payments over several months.
• Forbearance to selling: If you cannot afford the home long-term, selling during or after forbearance may be the best financial decision.
• Forbearance to short sale: If you owe more than the home is worth and cannot continue payments, a short sale may be an option.

When Forbearance Helps vs When It Makes Things Worse

Forbearance may help when:

• You have a temporary hardship with a clear end date
• You expect to return to work or recover from a medical issue
• You have been affected by a natural disaster
• You need time to sell the property but need to avoid foreclosure now

Forbearance may make things worse when:

• Your hardship is permanent and you will not be able to resume payments
• You cannot afford the repayment plan or balloon payment at the end
• You do not understand the terms of the agreement
• You use forbearance to delay an inevitable foreclosure without a plan
• The accumulated missed payments become an additional burden you cannot handle

Florida-Specific Considerations

Florida homeowners face some unique factors when considering forbearance:

• Hurricane vulnerability: Florida's hurricane season brings recurring disaster declarations, which can trigger eligibility for disaster forbearance. If your property is damaged, you may qualify for both insurance claim assistance and mortgage forbearance.
• Homestead protection: Florida's homestead exemption may affect how foreclosure proceedings work after forbearance ends. The homestead cap on property tax increases can help some homeowners manage post-forbearance costs.
• Rising costs: Florida's rising property insurance and tax costs may make it harder to resume full payments after forbearance. Factor in these ongoing expenses when evaluating whether forbearance is the right choice.
• Citizens Insurance: If your insurance costs have driven you to Citizens Insurance, the higher premiums may strain your budget after forbearance payments resume.
• HOA and CDD fees: In many Florida communities, HOA fees and CDD assessments are additional costs that continue even during forbearance and can complicate a post-forbearance budget.

Frequently Asked Questions

Is mortgage forbearance forgiveness?

No. Forbearance is a temporary pause or reduction in payments. The missed payments must be repaid according to the terms of your forbearance plan. It is not loan forgiveness.

Does forbearance hurt my credit score?

If you enter a forbearance agreement before missing payments, the agreed arrangement typically does not negatively affect your credit. If you already missed payments before requesting forbearance, those late payments may already be reported.

How long does mortgage forbearance last?

Typical forbearance periods are 3 to 6 months, with possible extensions. COVID-era forbearance under the CARES Act allowed up to 12 months for eligible borrowers.

What happens if I cannot pay after forbearance ends?

If you cannot resume payments after forbearance, you may qualify for a loan modification, an extension, or other loss mitigation options. Selling the property or negotiating a short sale may also be practical alternatives.

Can I sell my house during forbearance?

Yes, you can sell your home during forbearance. The sale proceeds will go toward paying off the mortgage including any missed payments. This may be a good option if you cannot resume payments after forbearance.

Are there Florida-specific forbearance rules?

Florida's homestead protections, hurricane disaster eligibility, and rising insurance and HOA costs are all important factors to consider when evaluating forbearance. Contact your servicer about available options specific to your situation.

Related Articles

• What to Do If You Cannot Pay Your Mortgage
• Can a Loan Modification Help You Keep Your Home?
• Selling a House Fast in Central Florida
• Questions to Ask Your Mortgage Servicer

Sources and Further Reading

• CFPB - Mortgage Relief Resources
• HUD Housing Counseling
• HUD - Avoiding Foreclosure