Forbearance
Asset-Backed Securities glossary · Asset Specific Nuances
Definition
Temporary suspension or reduction of borrower payments granted by the servicer; usually preserves the loan's contractual rate but defers cash flows.
Forbearance in plain English
Forbearance is when the company collecting your loan payments (the servicer) lets you temporarily pause or shrink what you owe each month — usually because you've hit hard times, like a job loss. Your loan's interest rate normally stays the same; you're not being forgiven the debt, just given breathing room, so the payments are pushed to later. It's like asking a friend you owe money, "Can I skip this month and catch up later?" — the debt doesn't vanish, but the timing shifts. For bond investors this matters because the cash they were expecting arrives later than planned.
Learn these first
Related Asset-Backed Securities terms
Asset-Backed Securities practice questions · Asset-Backed Securities flashcards · Asset-Backed Securities study guide