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The Difference Between Forbearance And Foreclosure

January 11, 2023 7-minute read

Author: Victoria Araj


You’ve probably heard the words “forbearance” and “foreclosure” tossed around, but what do they actually mean for you and your mortgage?

You may have financed a part of your home with a lender. In exchange for this financing, you agree to pay the financed amount, also called the principal, back in monthly installments, plus interest. What happens if you’re unable to pay this monthly amount? That’s when words like forbearance and foreclosure might start popping up.

Whether you’re struggling financially or simply looking to brush up on your knowledge of the mortgage industry, we’ve created a guide to help you understand these terms.

What Is Forbearance?

Forbearance refers to an agreement made between you (the homeowner) and your lender in the event that you’re unable to pay your monthly mortgage amount for any reason. The lender freezes your payment requirements for a set amount of time. After this date, you would be required to continue your normal monthly mortgage payments, and pay back the balance owed, plus any interest or fees that accumulated during your grace period.

You might turn to forbearance if you’re having financial difficulties in the short term and need some time to catch up on payments.

How To Work With Your Lender

You’ll want to reach out as soon as possible if you’re interested in finding out if your lender would agree to a forbearance. The earlier you reach out, the more likely your lender will be to work with you to come up with a plan that suits both parties’ needs and discuss if mortgage forbearance is a good idea for you.

Here’s how to work with your lender to get a forbearance.

Step 1: Reach Out To Your Lender

The very first step is to contact your lender and let them know about your financial situation. It’s ideal to call and speak to a representative, but some mortgage lenders have online chat options or forbearance application forms you can also use.

Your lender will need some key information and documentation from you. Be ready to provide the following:

  • An overview of your financial hardship – include what’s causing financial issues and when you expect the struggle to be resolved
  • Your mortgage loan or account number
  • Your monthly income before taxes
  • An itemized list of your monthly expenses
  • Unemployment benefits information, if applicable

Keep in mind that your lender will want to do everything they can to keep you in your home, paying your mortgage, so don’t be afraid to let them know you need a little bit of help.

Step 2: Request A Forbearance Agreement

There are a few steps the lender must follow before granting you a forbearance. First, they might ask you to try reducing your monthly expenses if there are any red flags or costs that seem unnecessary. Be prepared to speak about these expenses and explain where costs have been cut and why certain items can’t be cut. They may also ask you to prove you’re looking for work or a better-paying job.

Once you’ve answered their questions, you can ask them to agree to a forbearance agreement.

Step 3: Submit Financial Records

Next, you’ll want to verify your financial hardships. Send your lender your unemployment award letter, which contains the amount you’re being paid; two of your last W-2s that reflect your minimal or reduced wages, two recent bank statements, a full list of your debts (bills and money you owe) and assets (your home, car and anything else of value) and your last two federal tax returns.

Your lender needs to be able to see your entire financial picture before they can draft and agree to a forbearance. From here, you’ll want to follow up with your lender until they assign a negotiator or loan officer to your account. This person will work with you and be your main point of contact throughout the rest of the process.

Step 4: Wait For Approval

Once you have a negotiator or loan officer, there’s not much to do except wait for forbearance approval. This can take several weeks, but you should diligently follow up to show the lender that you’re taking this request seriously.

Step 5: Receive Your Forbearance Letter

Once you’re approved for forbearance, the negotiator or loan officer will work to draft up a forbearance letter detailing the terms of your agreement. This letter will cover the forbearance period time frame, how much you’ll pay (if anything) during the forbearance period, additional fees or interest to be added to the amount owed and terms for repaying the outstanding balance after the forbearance period. You can talk to your loan officer to try to negotiate these terms if needed.

Step 6: Sign And Return Your Forbearance Agreement

Once you’re satisfied with the terms, sign and return the agreement to the lender. From there, your forbearance period will start. After this period ends, your payments will return to normal and additional payments will be required to cover the outstanding balance.

Let’s say you fail to follow the forbearance terms or cannot make the agreed-upon payments. Your home will likely go into foreclosure.

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What Is Foreclosure?

Foreclosure is a legal process that occurs when you are unable to continue making mortgage payments, and as a result, you forfeit rights to your home. The bank or lender would take over ownership of the property.

Foreclosure is the very last step before you lose ownership of your home. If a forbearance plan doesn’t help you get back on track with your finances, you’ll want to reach out to your lender before your home is foreclosed on.

A new payment plan might be able to help you avoid foreclosure. You can also speak with your lender about a short sale, where the property is listed on the market and sold for less than you owe on the mortgage. This could help alleviate your financial issues – but all the money paid by the buyer will go toward your outstanding mortgage balance.

Let’s say the lender is unwilling to work with you or if you’ve gone too long without reaching out about a payment plan. You’ll want to prepare for the foreclosure process. Here’s what to expect.

The Foreclosure Process

Foreclosures are still common and you’re not alone in this experience. Here’s how to prepare if you find yourself in this boat.

Step 1: Your Lender Will Notify You Of Your Mortgage Default

The first step your lender must take before foreclosing on your home is to give you notice of your default, or your failure to pay your mortgage. At this point, you still have options to move your mortgage out of default, including forbearance, short sales or working out a deferment or payment plan with your lender.

This notice is typically sent out after a mortgage has not been paid for 30 – 45 days. It will also detail a time period for repaying the balance owed to put the home loan back into good standing.

Step 2: The Lender Proceeds With Legal Filing

Are you unable to make the payments required or come up with a satisfactory agreement with your lender? If so, they will most likely move forward with legal foreclosure filings. This could happen in two different ways.

  1. Your lender could file a nonjudicial foreclosure, which allows them to take possession of your property. The time frame from filing to foreclosing on the home is detailed in your mortgage paperwork, so be sure to review this contract for more information.
  2. Your lender could also file a judicial foreclosure, which means they’ll file a lawsuit against you in order to receive legal permission to sell your property. This action is typically taken after you default on your home loan for more than 90 days, without making any effort to make payments.

Step 3: The Lender Will Notify You Of A Foreclosure Sale

Federal law states that lenders must wait 120 days before foreclosing on a home, which gives you roughly 4 months to make new living arrangements and move. However, each state has its own rules, so be sure to research foreclosure laws in your state.

Once the lender has filed for judicial or nonjudicial foreclosure, you’ll be mailed a notice of foreclosure sale, which is a letter that indicates the date you must leave your home. You might need more time to make preparations – you can ask for more time to move out of the property and work out a new date with your lender, but they are not legally obligated to negotiate with you at this point.

The lender can file a lawsuit to have you evicted from the property if you do not leave by the required date. It’s best to work to move out of the home as quickly as possible so you won’t have to deal with further legal action.


Sometimes financial hardships strike when you least expect them, and you might be looking at a mortgage forbearance or foreclosure. Reach out to your lender as soon as possible if you find yourself in a tight financial situation. The sooner you reach out, the more options you’ll have available to help you fix the situation and get back on track.

Work toward a forbearance agreement that you can afford and make sure you make all necessary payments on time to avoid foreclosure. Talk to your lender about the possibility of renegotiating your forbearance agreement or consider a short sale if you find that foreclosure is becoming more and more likely.

Be sure to follow all of the legal requirements to make foreclosure as easy as possible if it’s unavoidable. Prepare to move before the foreclosure date and adhere to your lender’s requirements to ensure no further legal action is taken.

Remember, foreclosure isn’t the end of the world. If your home does get foreclosed on, work to manage your budget and finances, improve your credit and learn from this experience. You can own a home again – even if you’ve dealt with home foreclosure in the past.

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.