If the borrower has more serious problems, e. g. the return to full mortgage payments in the long term does not appear sustainable, then forbearance is usually not a solution.
In response to COVID-19 government sponsored mortgage loans in the United States qualify for forbearance plans in compliance with the CARES Act.
A forbearance is not forgiveness and interest continues to accrue and if a final work out arrangement is not adopted foreclosure later down the line can be pursued by the lender.
For example, borrowers in short-term financial difficulty would be more likely to be approved of either a (short term) full moratorium or negative-amortising deal than customers in long-term financial difficulty, where the lender would at all times seek to ensure that the capital balance continues to be reduced (via an amortising forbearance arrangement).
Negative-amortising forbearance arrangements are only suitable as short-term deals since failure to pay interest timely and/or on the whole loan balance is effectively additional borrowing.
Depending on the parameters of the agreement consumers can be held fully responsible for paying the entire amount due after the duration of the forbearance.
[5] A lender who grants a forbearance is refraining from enforcing its right to realize interest on securities under their agreement or contract with the borrower.
[6] The COVID -19 policy requires the lenders to make contact with the consumer to obtain specifics of the scenario and to perform an assessment of the hardship and ability to repay.