Life can be unpredictable. From losing a job to sudden expenses or even natural disasters, financial challenges can affect anyone. The silver lining? If you're a homeowner facing tough times, there's a solution that many may not know about: mortgage forbearance.

What Does Mortgage Forbearance Mean?

According to Bankrate,

““Mortgage forbearance is an option that allows borrowers to pause or lower their mortgage payments while dealing with a short-term crisis, such as a job loss, illness or other financial setback . . . When you can’t afford to pay your mortgage, forbearance gives you a chance to sort out your finances and get back on track.”
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— Bankrate

Many people think that forbearance was only available during the COVID-19 pandemic. While it certainly helped homeowners during that tough time, what isn’t widely known is that forbearance is still a resource for borrowers who need support. Today, it continues to be an important option for homeowners facing difficulties, helping them avoid falling behind on payments and ultimately, foreclosure.

The Present Condition of Mortgage Forbearance

Forbearance remains a helpful option for homeowners going through short-term financial difficulties. Although we've noticed a slight uptick in forbearance rates recently, it’s crucial to look at what’s causing this shift and how it relates to the larger landscape.

Marina Walsh, the VP of Industry Analysis at the Mortgage Bankers Association (MBA), states that...

““The overall mortgage forbearance rate increased three basis points in November and has now risen for six consecutive months.”
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— Marina Walsh, VP of Industry Analysis at the Mortgage Bankers Association (MBA)

This might look a bit alarming at first, but let's take a moment to unpack it. The graph below, which traces back to 2020, offers some clarity on the situation:

The percentage of mortgages in forbearance has dropped quite a bit since its highest point in mid-2020, but we've seen a minor increase recently. This rise is mostly connected to the impact of two recent hurricanes, Helene and Milton.

Natural disasters can lead to temporary financial difficulties for homeowners, which is why forbearance becomes an essential support during the recovery process. In fact, 46% of borrowers currently in forbearance point to natural disasters as the cause of their financial challenges.

Even with the latest increase, the percentage of mortgages in forbearance is still far below the levels we saw during the pandemic, and fortunately, it represents just a small fraction of all homeowners.

Why Mortgage Forbearance Is Important

Forbearance is a useful option for borrowers who want to prevent falling behind on payments or facing foreclosure. It gives them some time to tackle their issues and figure out what to do next. While most homeowners today are in a solid position and don’t require forbearance—thanks to good equity and a stable housing market—it's still available for those who do find themselves in need.

If you or someone you know is dealing with financial challenges, the first thing to do is reach out to your mortgage lender. They can guide you through the forbearance process and explain your options. Remember, forbearance isn’t something that happens automatically; you need to apply for it and have a conversation about the terms with your lender.

Bottom Line

In challenging times, understanding your choices can really ease your worries. Forbearance isn’t merely a financial strategy; it’s a crucial support system. Although the recent rise in forbearance rates may grab your attention, it's important to remember that this option is doing what it's meant to do: assisting those who are facing tough situations so they can stay in their homes without the fear of losing them.