Forbearance Agreement Law and Legal Definition

A forbearance agreement is typically an agreement to postpone, reduce, or suspend payment due on a loan for a limited and specific time period. Interest that accrues during the forbearance remains the debtor's responsibility. When the forbearance expires the unpaid interest is added (capitalized) to the principal balance of the loan. A forbearance request must be approved by the lender.

Typically, the lender agrees not to foreclose on the property or accelerate payments due on the loan during the forbearance period. In exchange, the debtor agrees not to contest any actions taken by the creditor to collect the debt in the event that the debtor fails to make scheduled payments or live up to other terms of the forbearance agreement. In some forbearance agreements, the debtor may grant the creditor a deed in lieu of foreclosure if the terms of the forbearance agreement are not met.