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Understanding Forbearance and Foreclosure

Understanding Forbearance and Foreclosure

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The terms forbearance and foreclosure are used frequently in the mortgage and real estate industry. And although they sound similar, these terms describe and encompass completely different things. So whether you’re brushing up on your terminology or you want to share this information with someone, there is plenty to cover! Here is a simple breakdown of forbearance and foreclosure.


When it comes to mortgages, if a homeowner is going through a period of financial difficulty and cannot fulfill their promissory obligations – there is a way to stay afloat. One such way is called a forbearance agreement which is when a lender pauses or decreases loan payments for a specified period. Just like with the initial loan, the borrower must qualify for this type of payment relief; some qualifying situations can be job loss, disability, illness, divorce, death, and other critical reasons.

Though helpful in a monetary crunch – loans typically accrue interest during the forbearance period. Also, it’s essential to remember that these variables are contingent on the borrower’s agreement with the lender. Mortgage companies may ask the homeowner to continue to pay toward the principal amount each month; to be certain of the terms, it’s best for the homeowner to fully discuss the parameters of the agreement and repay accordingly. Homeowners can still sell their property if a loan is in forbearance — the foreborn amount would become payable upon sale of the property. And of course, this pertains to the mortgage and other loan-type industries, yet you may occasionally hear the term.


Like forbearance, financial difficulty, personal hardship, and other extenuating circumstances is usually a catalyst for foreclosure. Defaulting on a mortgage can add the cost of various fees to the amount a borrower already owes and of course damage their credit score. Ultimately, it can lead to the homeowner losing their home in a legal process called foreclosure, where the lender repossessed property from a borrower due to missed payments or violation of the loan agreement.

Depending on the state and county, several steps happen before a foreclosure proceeding is enacted, such as notices to the homeowner, public notice, and pre-foreclosure, yet all proceedings end with the mortgage servicer selling off the property at auction. There are even different types of foreclosures: pre-foreclosure, short sale, sheriff’s sale, and real estate owned. In many states, the homeowner could be responsible for paying a “deficiency judgment” — the difference between what is owed and the price the home sells for at the foreclosure auction. 

We hope this brief refresher about the difference between forbearance and foreclosure assists you — pass it on to anyone that may be interested in purchasing a recently foreclosed property, for example. 

At Equitable Title & Escrow, we pride ourselves on delivering complementary and efficient services that protect the closing experience. Our staff works diligently to connect with agents at our local offices. Learn more about the advantages of considering us a go-to for escrow and title processing.