What action can a borrower take if they experience loan default?

When a borrower experiences a loan default, seeking a forbearance agreement is a practical and often effective action. A forbearance agreement allows the borrower to temporarily reduce or suspend their mortgage payments for a specified period, providing financial relief and the opportunity to get back on stable ground. This arrangement is beneficial because it allows the borrower to avoid foreclosure while they address the financial issues that led to the default.

In contrast, declaring bankruptcy can have severe long-term consequences on a borrower's credit and may not be the best first step to resolve a default. Refinancing immediately might not be feasible if the borrower is already in a state of default, as lenders typically require that borrowers be in good standing to qualify for refinancing. Selling the property without lender approval is not permissible if there is still an outstanding mortgage; the lender must be notified and often must approve the sale.

Therefore, seeking a forbearance agreement provides the borrower with structured support and can be a proactive approach to managing their financial difficulties.