Glossary

Forbearance Agreement

Also known as: Forbearance

A negotiated agreement under which a lender agrees to temporarily refrain from exercising default remedies — acceleration, foreclosure, receivership — against a borrower in exchange for specified conditions, typically a revised near-term payment schedule, paydowns, additional reporting, or enhanced collateral or guaranties.

Forbearance does not cure a default or restructure the loan's permanent terms; it simply delays the lender's exercise of remedies for a defined period while the parties pursue a longer-term resolution — a sale, refinancing, capital infusion, or eventual modification. Borrowers should not mistake forbearance for forgiveness: nearly every forbearance agreement requires the borrower to reaffirm the debt and existing default, waive claims or defenses against the lender (a release provision lenders insist on precisely because ongoing dialogue during distress is a common source of lender-liability litigation), and acknowledge that any notice of default already issued remains effective, so a second default during the forbearance period typically allows the lender to proceed straight to foreclosure without restarting the notice and cure process. Because forbearance is a bridge rather than a destination, sophisticated workouts often pair it with a pre-negotiation agreement beforehand and either a loan modification or a deed-in-escrow arrangement as the eventual off-ramp.