In one sentence
A lender's temporary agreement to withhold enforcing its rights, giving a struggling borrower room without permanently changing the loan.
The longer version
Forbearance pauses enforcement for a defined period on defined conditions, often while a longer-term workout is negotiated. It is documented carefully, because it can waive rights if drafted loosely.
For servicers, forbearance agreements and their conditions become tracked items: milestones, financial reporting, and deadlines that determine whether the loan recovers or moves to workout.
Common questions
- What is forbearance on a commercial loan?
- A lender's temporary agreement not to enforce its remedies, giving a borrower time to cure or recover, while the underlying loan terms and defaults remain in place.
- What is the difference between forbearance and a modification?
- Forbearance pauses enforcement for a period without changing the loan. A modification permanently changes the loan's terms.
- What does a forbearance agreement usually require?
- Acknowledgment of the default, defined milestones such as a sale or refinance, cash management or reporting, and often a release of claims against the lender.
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