Borrowers hit rough patches. NoteHarbor gives you three tools for it, and picking the right one matters — they do very different things to the money.
Which one do I want?
| You want to… | Use |
|---|---|
| Skip one payment, forgive nothing, undo it later | Defer (on the Schedule tab) |
| Pause payments for a period | Forbearance |
| Permanently change the rate, term, or balance | Modify Loan |
A deferral is a small, reversible courtesy. A forbearance is a temporary agreement with a start, an end, and a decision about the interest that builds up meanwhile. A modification rewrites the note permanently and cannot be undone.
Deferring one payment
Open the loan's Schedule tab and hit Defer on the installment. That payment stops counting as late and no late fee is charged on it.
Nothing is forgiven. The balance does not change, so interest keeps building exactly as it would have. All that changes is which payment the loan is waiting on.
You can only defer the payment the loan is currently waiting on. Deferring one further out would stop its late fee without stopping the loan counting as late, so NoteHarbor asks you to defer the current one — or pause a whole period with a forbearance.
The row shows a Deferred badge and the button becomes Undo. Undo puts the next-payment date back and the installment is due again, late fee and all, under the normal rules. Anything that happened since is left alone: if the borrower fell behind in the meantime, undoing does not erase that history.
Starting a forbearance
Forbearance is in the loan's action bar. It asks four questions.
When do payments pause, and when do they resume? In between, no late fees are charged and the loan is not counted as late. Any late fee already charged inside that window is reversed on the spot, and the loan's status becomes Forbearance.
When it ends, are the missed payments due? Answer this first — it decides what the other choices can be.
- Due — the borrower catches up. They become payable the moment the pause ends, and the loan reads behind again until they are made. This catch-up is what the industry calls reinstating the loan.
- Moved to the end of the loan. Not owed as a lump sum; the loan just runs longer and the borrower resumes the regular payment owing nothing back.
What happens to the interest? The missed payments each contain interest — that is where the paused interest lives, so your options depend on the answer above.
Borrower catching up:
- Leave it as it is (default) — nothing forgiven, nothing moved. They pay it when they catch up.
- Forgive it — they catch up on the principal only.
Missed payments moved to the end: those payments get rebuilt into the schedule, so their interest needs a destination. There is no "leave it alone" here — that would quietly write it off without telling you.
- Defer it (recommended) — moves to a separate deferred balance, due at payoff or maturity. No interest is charged on it and it is not in the monthly payment, but the borrower still owes it. It shows on statements and in every payoff quote. Same arrangement the mortgage agencies used for pandemic payment deferrals.
- Add it to the loan balance — joins the principal, so the borrower now pays interest on it too. Costs them more than deferring.
Forgiveness isn't offered here: moving the payments to the end already settles the arrears, so there's nothing left in front of the borrower to forgive. To forgive, pick the borrower catches up instead.
Why the choices change. If the borrower is catching up, the missed payments already contain that interest — moving it somewhere as well would bill it twice. Once those payments move to the end, the interest has to go somewhere or it disappears. NoteHarbor only offers the honest combinations, and tells you on screen if narrowing the list changed a choice you had already made.
What happens to the escrow? When the borrower is catching up, the escrow in the missed payments can be still owed or forgiven. Either way the taxes and insurance still come due, so re-run the escrow analysis once the forbearance ends.
The borrower's payment never changes. Capitalising interest or moving payments to the end moves the payoff date, never the amount due each month.
NoteHarbor shows you every one of these consequences in plain English on a confirmation step before anything is saved.
While it runs
The loan carries a banner with the dates, everything that was agreed, and how many days are left — and it tells you when the resume date has passed and the forbearance still needs ending.
Take it seriously: while that banner is up, the loan is deliberately not accruing late fees and not counting days late.
Ending it, or calling it off
End forbearance applies what was agreed and puts the loan back to its previous status. End it early and only the period the borrower was actually paused counts.
Cancel it treats it as if it had never happened — no interest added, forgiven, or carried. One thing does not come back: late fees reversed at the start stay reversed. The borrower was told those were forgiven.
Both are recorded in the loan's audit log with the exact amounts.
Undoing a settlement
Ended one by mistake? Undo last forbearance reverses the settlement completely — balance, payment, term, maturity, the schedule, any deferred balance, and the reversed late charges all come back, and the arrangement goes back to running.
It is all-or-nothing. If a payment has been recorded since the pause began (or back-dated in afterwards), any of the deferred balance has been collected, another arrangement or a term change has happened, or the loan has closed, NoteHarbor refuses and changes nothing, naming what it found. Undoing twice is harmless.
The undone arrangement is then closed — it does not resume. The loan goes back to the status it had before the pause, and late fees for the paused period stay suppressed. To pause again, or to settle on different terms, start a new forbearance: that is where you re-pick the interest treatment if you chose the wrong one.
Undo restores the loan's shape, not its payment history: if the borrower fell further behind afterwards, that stays. The days-late figure is recalculated from the restored due date rather than reset, so a reversal can never quietly erase a real payment record.
What ends up on the 1098
Form 1098 reports the interest you received, which settles all three options:
- Left as it is — nothing received yet, so nothing reported yet. It is reported in the year they actually pay it.
- Deferred — nothing received, so nothing reported while it sits in the deferred balance. Reported in the year they pay it off.
- Added to the balance — no money changed hands, so it is not reported when it is added. It is reported later, as they pay it off out of the larger balance. Reporting it at both points would be double-counting.
- Forgiven — never received, so never reported.
Forgiving a material amount of interest may raise a 1099-C cancellation-of-debt question for the borrower. NoteHarbor records the exact forgiven figure on the loan so you have the number, but whether to file is a question for your CPA — this is reporting support, not tax advice.
One at a time
A loan can have only one forbearance running at once, and a payment can be deferred once at a time. End or cancel the current one first. Past ones stay on the loan as history, including what was agreed and what it cost.