What is a Forbearance Agreement?

• Forbearance can help debtors, including homeowners, by temporarily pausing or reducing monthly payments
• Understanding when you qualify for forbearance and how to navigate the process is key to securing relief
• OakTree Law can help clarify your options and negotiate on your behalf

Sorting through debt and mortgage relief options can be overwhelming—especially when the terms sound more intimidating than they really are. Forbearance is often a confusing point, yet it’s simply the legal term for loan forgiveness—a structured adjustment to payments designed to help borrowers through tough times. Here we’ll discuss more about what a forbearance is and how it impacts California property owners.

What Is a Forbearance?

A forbearance is an arrangement between you and your lender or creditor that allows you to skip or reduce payments due to financial hardships. It can apply to any type of loan. It’s a formalized means of getting temporary relief from various types of debt, including student loans, credit cards, personal loans, and more. A forbearance agreement is typically initiated at your request and negotiated directly with your lender/creditor.

What Is a Mortgage Forbearance?

A mortgage forbearance applies specifically to home loans. While these types of real estate forbearance agreements are also often initiated by homeowners, they can be mandated or facilitated by laws or government programs (more on that below). They can involve either a reduction or suspension in payments, normally for a set period of time.

Situations Meriting Forbearance

A key concept in the long answer to “What is a forbearance?” is that it is intended for temporary financial distress that is involuntary or unavoidable. Overspending on a vacation or quitting your job won’t qualify you to negotiate a forbearance agreement. Common situations that demonstrate a genuine need for relief include:

• Reduced Income: If you’re facing sudden unemployment, a layoff, a salary or hours cut, or another substantial decrease in income, forbearance may offer you some breathing room until your income stabilizes.
• Medical Debt: Health crises can create significant financial strain. If medical bills keep you from meeting your monthly obligations, forbearance can protect your home while you recover.
• Divorce: Family changes can be another disruptor to your finances. Lenders may consider this change in circumstances when evaluating your need for forbearance.
• Other Hardships: Additional situations that create a short-term inability to pay may qualify you for a forbearance agreement. Temporary disability, large repair bills, or relocation, for example, could be considered as factors.

Unique Circumstances

In recent years, unique situations that have impacted large portions of the population have also come into play when negotiating mortgage forbearance agreements. COVID-19 caused enormous financial strain for homeowners, and natural disasters, such as the recent California wildfires, have also triggered a wave of forbearance requests.

Widespread situations like these sometimes trigger government involvement, making it easier for borrowers to get relief. During the pandemic, for instance, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) extended the length of standard forbearance agreements, temporarily suspended foreclosures, and eliminated credit score penalties for missed payments.

As of mid-2025, a California state bill (AB 238) is making its way through the legislative process. It intends to provide forbearance to homeowners experiencing hardship due to California’s Eaton and Palisades wildfires. It is modeled after the CARES Act and aims to offer similar financial relief.

Staying on top of government and legally mandated programs and negotiating their ins and outs can be challenging. Working with an experienced foreclosure attorney ensures you understand all of your options so you pursue the best path to financial recovery, whether that’s negotiating a forbearance agreement or pursuing another alternative.

How Does a Mortgage Forbearance Agreement Work?

Whether you reach out to request a forbearance on your own or involve a Southern California law firm to assist with the process, here is what obtaining a mortgage forbearance entails:

1. Documentation: You’ll need proof of the hardship that is causing you to fall behind in your mortgage payments. This could include termination paperwork, medical bills, a divorce decree, etc.
2. Lender Outreach: You or your legal representative will reach out to your lender to explain your situation. Some lenders have online portals for this purpose.
3. Request Submission: The next step is to submit a formal request for forbearance. It should include your hardship documentation, as well as details about your income, expenses, and assets. Working with a bankruptcy and debt attorney can ensure you’re presenting your case in a way most likely to secure a forbearance agreement.
4. Case Review: Your lender will review your request and determine if you qualify. They may offer to adjust your interest rate, reduce your payments, or institute a full payment pause.
5. Decision: Your lender will approve or deny your forbearance. If denied, most lenders must provide an appeal process. A foreclosure defense attorney can help you navigate your appeal.

Is a Forbearance Agreement the Right Choice?

Now that you understand what a mortgage forbearance is, it can help clarify when it might be the right choice for you. In general, if your financial hardship is temporary, you expect to recover your ability to make payments once the forbearance ends, and you can tolerate a potential hit to your credit, it’s often the best choice for relief.

OakTree Is Here To Help

For many, entering into a forbearance agreement is enough to resolve a short-term payment problem and get back on their feet. Others may be better off pursuing a short sale or a deed in lieu of foreclosure. Speak with the legal professionals at OakTree to explore all available options for keeping your home.