Forbearance works by letting your loan servicer temporarily pause or reduce your payments while you’re going through a financial hardship, then requiring you to repay the missed amount through a structured plan once the pause ends. The money isn’t forgiven, and interest generally keeps accruing during the pause, so the total cost of the loan goes up even though you skipped payments. The mechanics differ between mortgages and federal student loans, and the details of how you exit forbearance often matter more than the pause itself.
What Happens During the Pause
When your servicer approves forbearance, you either stop making payments entirely or make smaller ones for a set number of months. During that window the servicer won’t start foreclosure and won’t charge late fees on the paused amounts. Interest, however, continues to accrue on the balance.1Consumer Financial Protection Bureau. What Is Mortgage Forbearance? That accrued interest doesn’t vanish; how it gets handled depends on the repayment option you pick at the end.
For loans owned by Fannie Mae or Freddie Mac, the initial forbearance period can last up to six months, with extensions available after that.2Fannie Mae. Forbearance FHA, VA, and USDA loans follow their own investor guidelines but offer generally similar timeframes. The length you actually get depends on the nature of your hardship and whether you can show a continuing need for relief.
Who Can Get Forbearance
Qualifying means showing a financial hardship: something that temporarily makes it difficult or impossible to keep up with payments. Common examples are job loss, a significant drop in income, serious illness or injury, divorce, or the death of a co-borrower. If your home is in a presidentially declared disaster area, you may also be eligible for forbearance and other mortgage assistance through federal programs.3USAGov. Mortgage Help and Home Repair Loans After a Disaster
For federally backed mortgages — those owned or insured by Fannie Mae, Freddie Mac, FHA, VA, or USDA — servicers are required by federal regulation to evaluate you for forbearance and other loss mitigation options once you report a hardship. The simplified, no-documentation pandemic process created by the CARES Act has expired, but the general obligation to offer loss mitigation on federally backed loans remains.4Consumer Financial Protection Bureau. CARES Act Forbearance and Foreclosure
Private loans are different. Commercial mortgages, portfolio loans, and private student loans treat forbearance as a contractual option, not a legal right. Some private lenders want proof of involuntary income loss. Some won’t consider a request until your account is already past due. Others will let you apply proactively before you miss a payment. If your loan is private, look at your promissory note or call your servicer to find out the actual process.
How to Request Forbearance
Call your servicer as soon as you know payments are going to be a problem. You don’t have to wait until you’re behind, and asking early gives you more options and protects your payment history. Most servicers accept requests by phone, through an online account portal, or by mail. Some servicers also require a request within a certain window after a qualifying event like a disaster, so moving quickly matters.1Consumer Financial Protection Bureau. What Is Mortgage Forbearance?
What You’ll Need to Submit
Expect to explain the hardship in writing and back it up with financial documents. Servicers commonly ask for recent pay stubs, bank statements showing your cash reserves, and a written description of what happened and how long you expect it to last. Many use a standardized Borrower Assistance Form that asks for a line-by-line breakdown of monthly income, expenses, and assets. If the hardship is medical, unpaid bills or a doctor’s statement about your ability to work can help.
Get your numbers right. Discrepancies between the income you state and the deposits in your bank statements can slow the review or lead to a denial. Double-check figures before submitting.
Deadlines Your Servicer Has to Meet
Under Regulation X, once your servicer receives a loss mitigation application it has to follow specific deadlines. If the application arrives at least 45 days before any scheduled foreclosure sale, the servicer must acknowledge receipt in writing within five business days and tell you whether the application is complete or what documents are still missing. Once it has a complete application more than 37 days before a foreclosure sale, it must evaluate you for all available options within 30 days and send a written notice of its decision.5eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
If you’re mailing your application, use certified mail with a return receipt so you can prove when the servicer received it. Watch your account while the request is pending. If late fees show up, dispute them right away.
How You Repay the Missed Amount
When forbearance ends, the missed payments are still owed. You and your servicer will pick from several options. For most government-backed loans, servicers cannot require a lump-sum payoff, so if a lump sum is the only option you’re being offered, ask about the alternatives.6Consumer Financial Protection Bureau. Exit Your Forbearance Carefully
- Reinstatement. You pay the entire past-due balance at once. It clears the account immediately but is often unrealistic right after a hardship.
- Repayment plan. A portion of the missed amount is added to each regular monthly payment for several months until the balance is caught up. Your monthly cost goes up temporarily, but there’s no lump sum.6Consumer Financial Protection Bureau. Exit Your Forbearance Carefully
- Payment deferral or partial claim. The missed amounts move to the end of the loan as a non-interest-bearing balance, due when you sell, refinance, or reach maturity. For FHA loans, this is called a standalone partial claim: the deferred amount sits in an interest-free subordinate lien against the property. Your monthly payment stays where it was before forbearance.7Fannie Mae. Options After a Forbearance Plan or Resolved COVID-19 Hardship8U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program
- Loan modification. The servicer changes the terms of the loan — usually by extending the repayment period or adjusting the interest rate — so the monthly payment is more affordable going forward. Some or all of the missed payments get folded into the new terms.6Consumer Financial Protection Bureau. Exit Your Forbearance Carefully
Each option costs something different over the long run. A repayment plan clears the arrears fast but raises your monthly obligation for a while. A deferral protects your monthly budget but adds to the payoff you’ll owe at sale or maturity. A modification may lower your payment but stretch out the life of the loan, meaning more interest paid overall. Ask your servicer to walk you through the total cost of each option before you sign anything.
The Escrow Shortage That Catches Borrowers Off Guard
Even after choosing a deferral or repayment plan, many borrowers see their monthly payment jump when forbearance ends. The reason is usually an escrow shortage. Your escrow account pays property taxes and homeowner’s insurance on your behalf. When mortgage payments are paused, the servicer often still advances those tax and insurance amounts, but nothing is flowing into the escrow account to cover them. The result is a shortfall the servicer has to recover.
Federal rules control how fast that recovery can happen. If the shortage is less than one month’s escrow payment, the servicer can require you to repay it within 30 days or spread it over at least 12 monthly installments. If the shortage is one month’s payment or more, the servicer must spread the repayment over at least 12 months.9Consumer Financial Protection Bureau. 12 CFR 1024.17 – Escrow Accounts Ask your servicer to estimate the escrow shortage as part of your exit options so you know the real monthly number.
What Forbearance Does to Your Credit and Your Next Mortgage
Credit impact depends on where you stood when you entered forbearance and what your agreement says. If you were current going in and you comply with the terms, the account generally should not be reported as delinquent. Get that in writing from your servicer before you sign. If you were already behind before entering forbearance, the earlier delinquency stays on your credit report. Forbearance pauses new delinquencies; it doesn’t erase old ones. The CARES Act rule that required accounts in a pandemic-related accommodation to be reported as current applied only during a defined covered period tied to the national emergency and has since expired.10Office of the Law Revision Counsel. 15 USC 1681s-2 – Responsibilities of Furnishers of Information to Consumer Reporting Agencies
Forbearance also affects how soon you can get a new mortgage. For FHA-insured loans, a borrower who completed a forbearance plan generally must make at least three consecutive on-time monthly payments before qualifying for a new FHA purchase loan, rate-and-term refinance, or streamline refinance. For a cash-out refinance, the requirement is twelve consecutive on-time payments.11U.S. Department of Housing and Urban Development. FHA Underwriting Guidelines for Borrowers With Previous Mortgage Payment Forbearance Fannie Mae takes a similar line: at least three timely, consecutive payments before the note date of a new loan, and those payments can’t be made as a lump sum.7Fannie Mae. Options After a Forbearance Plan or Resolved COVID-19 Hardship
When Forbearance Can Create a Tax Bill
Standard forbearance by itself doesn’t trigger any tax consequences, because nothing is forgiven. A tax issue can come up if the workout at the end of forbearance forgives debt, for example a loan modification that reduces your principal balance or a short sale where the lender writes off part of what you owe. In those situations the forgiven amount is generally treated as taxable income, and the lender reports it on Form 1099-C.12Internal Revenue Service. Home Foreclosure and Debt Cancellation
Several exceptions can reduce or eliminate the tax hit. Debt discharged through bankruptcy is not taxable income. If your total debts exceed the fair market value of your total assets when the debt is forgiven, some or all of the canceled amount may be excluded under the insolvency rule. And if the forgiven loan is non-recourse — meaning the lender’s only remedy is the property itself — the forgiveness does not create cancellation-of-debt income.12Internal Revenue Service. Home Foreclosure and Debt Cancellation Congress has also periodically passed legislation letting homeowners exclude forgiven mortgage debt on a principal residence from income, most recently for debt forgiven through 2025 up to $750,000. Whether that exclusion has been extended for later years depends on congressional action, so confirm the current status with the IRS or a tax professional before filing.
How Student Loan Forbearance Is Different
Federal student loans have their own forbearance system, and it doesn’t work the same way as mortgage forbearance. There are two categories. General forbearance is discretionary: you can request it for financial difficulty, medical expenses, or similar hardships, and the servicer decides whether to grant it. Mandatory forbearance is required when you meet specific criteria, such as total monthly student loan payments exceeding a set percentage of your gross monthly income, or serving in a medical or dental residency.
The biggest practical difference is interest. During a student loan forbearance, interest accrues on every loan type, including subsidized loans whose interest is otherwise covered by the government during certain other pause periods. When forbearance ends, that unpaid interest typically capitalizes: it gets added to your principal balance, and you then pay interest on a larger amount going forward. Because of this, borrowers who qualify for an income-driven repayment plan or a deferment instead of forbearance often pay less over the life of the loan.
If Your Servicer Gets It Wrong
Servicer errors happen. An application gets lost. Late fees appear that shouldn’t. Credit bureaus receive inaccurate information. Federal law gives you two formal channels.
Notice of Error
Under Regulation X, you can send your servicer a written notice of error that identifies the mistake. The servicer must acknowledge the notice in writing within five business days. It then has 30 business days to correct the error or explain in writing why it believes no error occurred, with a possible 15-day extension if it notifies you in advance. Once the servicer receives your notice, it cannot report negative information about the disputed payment to credit bureaus for 60 days.13eCFR. 12 CFR 1024.35 – Error Resolution Procedures Send the notice to the specific address your servicer has designated for error disputes; it’s usually on your monthly statement or website.
CFPB Complaint
You can also file a complaint with the Consumer Financial Protection Bureau through its online portal. Companies generally respond within 15 days, though in some cases a company may take up to 60 days to provide a final response.14Consumer Financial Protection Bureau. Submit a Complaint About a Financial Product or Service A CFPB complaint doesn’t replace the Notice of Error process, but it adds another layer of accountability and a public record of the servicer’s conduct.