What Is Mortgage Forbearance?
Mortgage forbearance is a temporary arrangement with your lender that allows you to pause or reduce mortgage payments when facing a short-term financial hardship—like job loss, illness, or natural disaster. While forbearance offers breathing room, it doesn’t cancel what’s owed. Deferred payments and accrued interest must eventually be repaid under agreed terms.
Why Forbearance Became So Prominent During COVID-19
The COVID-19 crisis propelled mortgage forbearance into the spotlight. Under the CARES Act, roughly 8 million homeowners paused their payments—helping most avoid foreclosure. This stands in stark contrast to the 2008 recession, when such relief options were less accessible.
Forbearance Has Shrunk—Steady, But Still There
By the end of March 2025, only about 180,000 U.S. homeowners were in forbearance—just 0.36% of all mortgages—down sharply since the pandemic peak. Many cases stemmed from temporary crises—like job loss or divorce—while about 21% were due to natural disasters.
Exit Paths After Forbearance
Most homeowners leave forbearance with a repayment strategy in place. According to Mortgage Bankers Association data:
- 77% exit with a “workout” plan—options like loan deferrals, resumed payments, or modifications.
- Only about 10% choose to sell their home upon exiting forbearance.
How Forbearance Shapes Housing Supply and Home Values
The impact of forbearance extends beyond individual homeowners:
- Preventing a Wave of Foreclosures
During the pandemic’s early stages, forbearance helped avert massive foreclosure waves, stabilizing the housing market. - Supply Relief, Not a Glut
If even a portion of homes exiting without workout plans go into foreclosure—say, one-third—it’d only add a modest supply to the market, helping ease housing tightness rather than destabilizing prices. - Supporting Home Values
The Federal Reserve noted that by allowing financially strained homeowners to stay put, forbearance helped limit housing supply and buoyed prices—adding around 0.6 percentage points to home price growth between April and August 2020.
For Real Estate Pros: What Sellers and Agents Should Know
- Home Sellers in Forbearance
Sellers must fully understand the total payoff obligation—it includes the original loan plus deferred payments, fees, and interest. Be transparent with your agent about any forbearance status to avoid surprises. - Agents Need Strategic Counseling Tools
Real estate professionals should:- Guide clients toward servicer-provided advice and options.
- Help structure sale plans that cover forbearance balances.
- Manage expectations to avoid sale delays or fallout.
Bottom Line: Forbearance as a Stabilizing Tool
Forbearance remains a vital safety net—helping homeowners through temporary setbacks and preventing foreclosures from overwhelming the housing market. While it’s not a cure-all, combined with job recovery and strong home values, it’s helped the market avoid the severe consequences seen in previous downturns.
Source: REALTOR® Magazine
“Mortgage Forbearance and Its Impact on Home Sales”
National Association of REALTORS®
Reprinted with permission
