No Payment, No Problem: The Rosy World of Forbearance

Posted by Ed 4 yrs ago

So what happens to debt when borrowers stop making payments on their mortgage, credit card debt, auto loan, or student loan, and the lender puts the delinquent loan into forbearance or into a deferral program, and notes the loan as “current,” despite past-due payments, because there is no payment due this month since the loan is now in forbearance?

Well, the algo of credit bureaus, such as Equifax, sees that the borrower who was delinquent has “cured” the delinquency and has become “current,” and it then raises the borrower’s credit score. A brave new world, but here we are.

Delinquent loan balances have plunged across all loan types, as these delinquent loans have been moved into forbearance or deferral programs, according to data from the New York Fed’s household credit report for the third quarter. 

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