When To Use A Forbearance Agreement

[2] There are more uncertainties than certainties about the economic outlook in response to COVID-19. One certainty is that loan defaults will increase. Those of us who lived through the Great Recession learned many valuable (if not painful) lessons when it comes to credit training and restructuring. A common tool for lenders dealing with problematic loans is the forbearance agreement. Forbearance agreements can take many forms and achieve many things. Forbearance agreements can maintain the status quo, give the borrower time to “get the ship in order,” provide more protection or collateral for the lender to recover, or simply give all parties time to figure out what to do next in the midst of stormy weather. Any leniency agreement or loan change in response to a borrower`s default must take into account certain considerations.