Nobody Knows How to Ever Get Out of This Mess | Wolf Street

So, the borrower is not making payments, and the bank doesn’t receive interest and principal payments, but since the loan is in forbearance, the borrower is not deemed in default and the lender can continue to show interest income on the loan, though no interest is being paid.

That’s the motivation for lenders: Rather than having to show the loan in default, and taking a hit on their earnings, they can continue to book unpaid interest as income, and show the loan as performing.

Some people want forbearance because it would be nice not to have to blow a bunch of money on mortgage payments or credit card payments or auto-loan payments, and instead be able to spend all this money on other things.

Other people want forbearance because they lost their job or businesses, and financially all heck has broken loose in their lives.

Nobody Knows How to Ever Get Out of This Mess | Wolf Street