Mortgage deferment, more precisely called a mortgage payment deferral, is a loss mitigation option that moves your missed mortgage payments to the end of your loan so you can resume your regular monthly payment right away. The deferred amount becomes a non-interest-bearing balance that isn’t due until you sell the home, refinance, or make your final payment.1Consumer Financial Protection Bureau. Exit Your Forbearance Carefully One thing to know up front: a deferral is almost always offered after a forbearance, not as a standalone product you apply for out of the blue. If you’re behind on payments or about to be, the first step is a forbearance agreement with your servicer; the deferral is how the missed payments get resolved when the pause ends.
How a Payment Deferral Works
When your servicer approves a payment deferral, all past-due principal and interest that accumulated during your hardship get pulled off your current balance and parked at the end of the loan. That parked amount does not accrue additional interest. Your monthly payment stays the same as it was before the hardship, and your loan’s maturity date stays the same as well. The deferred balance becomes due only when you sell the property, refinance the mortgage, or reach the loan’s final payment.1Consumer Financial Protection Bureau. Exit Your Forbearance Carefully
For loans backed by Fannie Mae, you’re eligible for a deferral if you’re between two and six months delinquent, you haven’t had a prior deferral within the last 12 months, and no more than 12 months of past-due payments have been deferred cumulatively over the life of the loan.2Fannie Mae. Payment Deferral Freddie Mac runs a similar program with comparable eligibility windows. The essential requirement for both is that you must be able to resume the regular monthly payment going forward. A deferral is designed for borrowers who have recovered from the hardship, not those still in it.
A deferral is usually the best available outcome when you can afford your normal payment again but can’t produce a lump sum to cover what you missed. You avoid a payment increase, you avoid changing the terms of your loan, and the arrearage stops generating new charges.
FHA Loans: The Partial Claim
If your mortgage is FHA-insured, the deferral equivalent is called a standalone partial claim. FHA advances an interest-free loan for the amount of missed payments, secured as a subordinate lien against the property. That second lien requires no monthly payments and becomes due when the primary mortgage is paid off, the property sells, title transfers, or the mortgage insurance terminates.3U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program
Federal law caps the partial claim amount at 30% of the unpaid principal balance at the time of the first partial claim.4Office of the Law Revision Counsel. 12 U.S. Code 1715u – Authority to Assist Mortgagors in Default If your missed payments exceed that ceiling, the servicer will combine a partial claim with another option or move you toward a full loan modification. FHA also offers a payment supplement program that uses a partial claim to temporarily reduce your monthly payment for up to three years, which can help if you’ve recovered but not fully.3U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program
One warning specific to FHA borrowers who locked in a low rate before rates climbed: a standard loan modification could actually raise your interest rate and monthly payment. A partial claim or payment supplement preserves your existing rate, so ask about those first.
Getting to a Deferral: The Forbearance Step
Because a deferral resolves the missed payments from a forbearance, the process starts with the forbearance request. Contact your servicer as soon as you realize you might miss a payment and explain your hardship. Common qualifying situations include job loss, unexpected medical costs, and recovering from a natural disaster.5Consumer Financial Protection Bureau. What Is Mortgage Forbearance? The servicer needs to see that the hardship is temporary and that you’ll be able to resume payments once it passes.
Expect to submit a hardship letter explaining what happened, along with recent bank statements and documentation of income changes like unemployment filings or reduced pay stubs. Government-backed loans (FHA, VA, USDA) often require less documentation up front than conventional loans held by private investors. Don’t wait to gather perfect paperwork before calling. Some servicers impose deadlines for requesting hardship assistance after a qualifying event, and the sooner you reach out, the more options remain available.5Consumer Financial Protection Bureau. What Is Mortgage Forbearance?
Do not simply stop paying without a formal agreement. Skipping payments without one is a default. It triggers late fees, negative credit reporting, and eventually foreclosure. A formal forbearance agreement prevents all of that and keeps the deferral pathway open when the pause ends.
An initial forbearance typically runs three to six months, and most loans can extend up to 12 months total. Your servicer will usually reach out about 30 days before the forbearance is scheduled to end to discuss next steps.1Consumer Financial Protection Bureau. Exit Your Forbearance Carefully Reach out proactively before that call so you have time to evaluate your options.
What Interest Does While You’re in Forbearance
Interest continues to accrue on your unpaid principal balance during a forbearance. How that accrued interest ultimately gets handled depends on which resolution option you choose. If you qualify for a payment deferral, the missed payments — including the interest portion — move to the back of the loan without generating additional interest going forward. If you end up in a loan modification instead, the arrearage may be rolled into a new principal balance. The resolution option matters more than the accrual itself.
Other Options a Servicer May Offer
When forbearance ends, your servicer will present several ways to resolve the missed payments. A deferral is usually the most favorable, but it isn’t the only option, and knowing the alternatives helps you push back if you’re steered somewhere worse.
Repayment Plan
A repayment plan spreads the missed payments over a set number of months on top of your regular mortgage payment. You pay your normal amount plus an extra portion each month until the arrearage is cleared.3U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program This works if your income has fully returned and you can absorb a temporarily higher payment. Be realistic about whether your budget can sustain it before agreeing.
Loan Modification
When the hardship turns out to be more permanent than temporary, a loan modification changes the mortgage contract itself. The servicer may extend the loan term, adjust the interest rate, or fold the past-due amount into a new principal balance.3U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program The goal is a monthly payment you can sustain long term. You may need to complete a trial payment plan of several months before the modification becomes permanent.
Lump Sum Reinstatement
A lump sum reinstatement means paying every dollar of missed principal, interest, and any advanced escrow in a single payment. For government-backed loans, servicers generally cannot require this. FHA, VA, USDA, Fannie Mae, and Freddie Mac all prohibit servicers from demanding full repayment all at once.1Consumer Financial Protection Bureau. Exit Your Forbearance Carefully If a servicer tells you the lump sum is your only option, push back and ask about a deferral, partial claim, repayment plan, or modification. They’re required to offer alternatives.
How a Deferral Affects Your Credit
A formal forbearance followed by a deferral should keep your credit intact. When you’re performing under an agreed-upon forbearance plan, servicers generally report the account as current to the credit bureaus. During the COVID-19 pandemic, Section 4021 of the CARES Act amended the Fair Credit Reporting Act to require accounts in a forbearance accommodation to be reported as current so long as the borrower was current before entering the accommodation.6Office of the Law Revision Counsel. 15 U.S. Code 1681s-2 – Responsibilities of Furnishers of Information to Consumer Reporting Agencies That specific mandate was tied to the national emergency, but reporting forbearance accounts as current remains standard practice for servicers of government-backed and GSE loans under their respective program guidelines.
The picture changes completely if you skip payments without an agreement. Unilateral non-payment produces 30-, 60-, and 90-day late marks that each do progressively more damage, along with late fees and eventual foreclosure exposure after 120 days.
Even a properly handled forbearance and deferral may show up in your loan history when you apply for future credit. Some mortgage programs impose a waiting period and a track record of on-time payments before approving a new loan or refinance. Fannie Mae has allowed borrowers who completed a loss mitigation solution to refinance after as few as three consecutive on-time payments in certain circumstances.7Fannie Mae. Fannie Mae Announces Flexibilities for Refinance and Home Purchase Eligibility Standard requirements outside those flexibilities are stricter, and you should generally expect to show six to 12 months of consistent payment history before qualifying for new credit.
A Deferral Doesn’t Forgive Debt
One boundary worth stating plainly: a payment deferral is not debt forgiveness. You still owe every dollar of the deferred amount, just on a later timeline. Because nothing is canceled, a straightforward forbearance-and-deferral sequence has no tax consequences. Tax issues arise only when part of your mortgage debt is actually forgiven or reduced, which typically happens through a loan modification that includes a principal reduction or through a short sale.8Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments If your servicer proposes a modification with principal reduction, talk to a tax professional before signing.
Protections If Things Go Wrong
Federal law gives you a few important safeguards while you’re pursuing loss mitigation. Under Regulation X, a servicer cannot begin foreclosure until your loan is more than 120 days delinquent, which exists specifically to give you time to apply for help.9Consumer Financial Protection Bureau. 1024.41 Loss Mitigation Procedures If you submit a complete loss mitigation application more than 37 days before a scheduled foreclosure sale, the servicer cannot conduct the sale while your application is pending. After receiving a complete application, the servicer must evaluate you for all available options and provide a written decision within 30 days.10eCFR. 12 CFR Part 1024 Subpart C – Mortgage Servicing
If your servicer mishandles your application, charges improper fees, or reports inaccurate information, send a written notice of error. The servicer must acknowledge it within five business days and either correct the error or investigate and respond within 30 business days.11Consumer Financial Protection Bureau. 1024.35 Error Resolution Procedures For 60 days after you submit the notice, the servicer cannot report negative information to credit bureaus about the payments in question.
Free Help Is Available
You don’t have to navigate this alone, and you shouldn’t pay anyone to help you. HUD-approved housing counseling agencies provide free or low-cost guidance on forbearance, deferrals, and other loss mitigation options.12Consumer Financial Protection Bureau. Find a Housing Counselor A counselor can review your situation, explain which resolution option makes sense for your loan type, and communicate with your servicer on your behalf. Find one at consumerfinance.gov/housing or by calling 855-411-2372. Be wary of any company charging upfront fees for mortgage relief; the legitimate help is free.