What is forbearance?
Forbearance allows a break from making payments, or grants a reduced payment amount. Interest continues to accrue during any period of forbearance, and you can opt to pay interest during this time. Forbearance is considered upon written request. The maximum forbearance time allowed over the life of the loan is 3 years, renewable at 12-month intervals.
A short-term, temporary suspension of your payments or a reduction of your payment amount. Forbearance is intended to help you if you’re having financial difficulties and do not qualify for a deferment. If CFI agrees to grant forbearance, you are responsible for the interest that accrues on your loan(s) during the period of forbearance. Normally, CFI will ask you to pay the interest during the forbearance, but in some circumstances, CFI may allow you to capitalize the interest at the end of the forbearance period. Keep in mind that if you capitalize the interest, your principal balance increases and you will pay more interest in the long run.
2. (In the context of mortgage) Loan borrowers sometimes have problems with their payments due to unexpected circumstances. This is certainly a problem which may cause the lender to start the foreclosure process. To avoid this situation, lender and borrower have the option to make an agreement called “forbearance”. According to this agreement, the lender delays his right to exercise foreclosure if the borrower could catch-up his payment schedule in a certain amount of time. This time-period and the payment plan depend on the details of the agreement which are accepted by both of the parties involved.
