forbearance agreement

forbearance agreement
An agreement between a creditor and a debtor. A forbearance agreement is utilized when a debtor has defaulted or is likely to default. Under the terms of the forbearance agreement, the debtor is given more time to make loan payments, a reduction in the amount of loan payments due each month or both. Typically, the lender agrees not to exercise rights to foreclose or accelerate during the forbearance period. In return, the debtor agrees not to contest any actions taken by the creditor to collect the debt in the event that the debtor fails to comply with the payment schedule or other terms specified in the forbearance agreement. In some forbearance agreements, the debtor may grant the creditor a deed in lieu of foreclosure if the terms of the forbearance agreement are not met.
Sometimes called a drop dead agreement. American Banker Glossary

Financial and business terms. 2012.

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