In one sentence
A written agreement in which a lender agrees not to exercise remedies for a defined period while the borrower works to cure a default or complete a resolution.
The longer version
Forbearance buys time without waiving the default. A well-drafted agreement acknowledges the default and the balance, preserves all remedies, sets milestones with dates, and provides that the standstill ends immediately on a breach of the agreement itself.
Lenders also use the moment to improve their position: obtaining estoppels of the debt, correcting document defects found in a file review, adding cash management, or securing additional collateral. That is why a workout often surfaces closing-era gaps that nobody noticed while the loan performed.
Common questions
- Does forbearance waive the default?
- No. A properly drafted agreement expressly preserves the default and all remedies, and only suspends enforcement for the stated period on the stated conditions.
- What does a lender typically ask for in return?
- An acknowledgement of the debt and the default, a release of claims against the lender, milestones with dates, and often additional protections such as cash management or corrected documentation.
- What happens when forbearance expires?
- Unless extended or replaced by a modification, the lender's remedies become available again immediately, which is why the milestone dates matter more than the end date.
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