With new times come new terms. Six months ago we had never heard of Coronavirus or social distancing. Now, we hear those terms so often we look forward to the day we never hear them again. Another term we’re starting hear in the wake of the Coronavirus outbreak is forbearance. Prior to COVID-19, most of us probably didn’t know what forbearance meant. Unfortunately, the financial impact of COVID-19 will likely cause many businesses and individuals to seek forbearance agreements with their creditors.
Forbearance means the action of refraining from exercising a legal right, especially enforcing the payment of a debt. A forbearance agreement is an agreement between a lender and a borrower (or a creditor and a debtor) to temporarily suspend the payments owed by the borrower to the lender. Forbearance agreements are often entered into in lieu of the lender filing a lawsuit to foreclose a mortgage or trust deed.
Borrowers, or debtors, adversely affected by the Coronavirus outbreak may need to enter into forbearance agreements with their creditors if unable to make their payments when due. Pursuant to the CARES Act, persons who have a federally backed mortgage can seek forbearance of their mortgage payments for up to nearly a year (they can initially apply for 180 days and then seek a 180 day extension). Many mortgages are federally backed. Interested persons should contact their loan servicer to determine if their mortgage is federally backed. Even if a mortgage isn’t federally backed, given the widespread financial impact of the outbreak, there is a fair chance the lender has some forbearance or other options available.