The Quick Read: To document a pandemic forbearance on a bank statement refinance, you prove three things: when the forbearance started and ended, how the missed or deferred payments were resolved, and that every payment since has been made on time. Your income still qualifies through bank statement deposits, so the forbearance is reviewed as housing history rather than as an income problem.
- Gather the servicer’s forbearance agreement, any modification or deferral paperwork, and the payment history since exit.
- Match every date in your explanation letter to those documents.
- Show post-exit payments clearing on your own bank statements.
- Expect the clock to run from the end of the event, not the start.
- Rules differ by program, so the lender’s sheet decides the outcome.
Self-employed borrowers often assume a forbearance from years ago is a dead end. Usually it isn’t. It is a paperwork exercise, and the borrowers who treat it that way tend to have the smoother files.
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What Is a Pandemic Forbearance in Underwriting Terms?
A forbearance is a temporary pause or reduction in mortgage payments that the servicer agreed to. It is not forgiveness. The balance stays due, and it gets repaid through a lump sum, a repayment plan, a deferral to the end of the loan, or a modification.
Underwriters care about how it ended. Those endings are not equal.
| How it ended | What the file needs to show |
|---|---|
| Reinstated | Payoff of the missed amount and current status |
| Deferred to loan end | Deferral agreement and on-time payments since |
| Modified | Modification agreement and payment history under the new terms |
| Repaid in full | Servicer letter confirming a zero past-due balance |
A forbearance followed by a modification typically gets a harder look than a clean reinstatement. Most programs we place files with treat each of these as a housing event of some kind, and the details vary lender to lender.
Why Can a Clean Credit Score Still Show a Forbearance?
Because the score and the tradeline comment are separate things. Under the CARES Act, servicers generally reported accounts as current during an accommodation, which protected scores. Nolo’s explainer notes that some servicers still added a comment to the tradeline, so a healthy score and a visible flag can coexist.
That is why the servicer’s own records matter more than the score. The loan history, the forbearance agreement and the payment ledger tell an underwriter what actually happened. If a tradeline looks wrong, dispute it before you apply rather than during review.
How Does the Forbearance Affect Bank Statement Income?
It doesn’t change the income math. A bank statement refinance builds qualifying income from 12 months of business or personal deposits, averaged, with lender-specific expense factors applied to business accounts. The loan is reviewed on documented income under the applicable program, subject to lender guidelines.
The forbearance enters through a different door: housing history and credit-event review. Two tracks run side by side, and keeping them separate in your own head makes the file cleaner.
One practical wrinkle. Reinstatement funds, catch-up payments or deferral-related transfers can land in your statements as deposits or withdrawals. Label them. Otherwise an underwriter may read a one-time reinstatement transfer as income, or wonder about an unexplained withdrawal.
Step by Step: Documenting the Forbearance
1. Identify the event type. Was it a plain forbearance, a deferral, or a forbearance followed by a modification? Name it exactly as the servicer’s paperwork does.
2. Build the date timeline. You need four dates: forbearance start, forbearance end, the reinstatement or modification date, and the first payment after exit. Here is a fictional example. A self-employed borrower enters forbearance, exits it, signs a deferral agreement, and has made every payment on time since. The file shows the agreement date, then a clean payment run after it. The underwriter reads that as a closed chapter.
3. Document post-exit payments. Use the servicer’s payment history, such as a verification of mortgage or a loan history printout, plus your bank statements showing those payments clearing. Matching the two is the heart of the file. HUD Mortgagee Letter 2020-30 shows the same documentation pattern in the FHA world: the plan, payment amounts, payment dates and a verification of mortgage. It is contrast only, since each lender sets its own rules, but it shows what a complete trail looks like.
3a. Show payments made during the forbearance. If you kept paying anyway, prove it with statement lines. Don’t assume the underwriter will take your word.
4. Collect the closing proof. Ask the servicer for a letter confirming the forbearance is complete and the loan is current. This is the single most useful document on most files.
5. Write a short letter of explanation. A good letter covers the cause, the resolution, and what has changed since. Keep it factual and brief. Here is the shape:
- Cause: one or two sentences on the hardship, such as a temporary drop in business deposits.
- Resolution: how the forbearance ended and the date.
- Since then: months of on-time payments and the current state of the business.
Every date in the letter must match the documents. Mismatches are the fastest way to turn a simple file into a long one.
What If the Hardship Shows Up in Your Deposits?
If a dip in business deposits falls inside the 12-month statement window, address it directly. A short line in the letter tying the lower months to the hardship, and the recovery after it, is enough. Don’t over-explain. The averaging method already accounts for the lower months, and the underwriter mostly wants to see that the trend has stabilized.
The related piece How to Document Deposits and Invoices on a Bank Statement Loan Refinance covers how to support unusual deposit lines in more detail.
Key Terms Defined
Forbearance: a temporary pause or reduction in mortgage payments agreed with the servicer; the balance remains due.
Deferral: a way of repaying missed payments by moving them to the end of the loan, often as a lien-like balance due at payoff or maturity.
Modification: a permanent change to the loan terms, which underwriters often treat more seriously than a simple reinstatement.
Verification of mortgage (VOM): a servicer-issued record of payment history on a mortgage.
Letter of explanation (LOE): a short written statement from the borrower explaining a credit or income issue, supported by documents.
Housing history: the record of on-time or late mortgage and rent payments, usually reviewed over the most recent 12 months.
Where the General Rule Breaks
Several edge cases change the answer.
An active forbearance. If you are still in forbearance, expect a stop. The sensible move is to finish the exit, then build a clean payment record before applying.
A forbearance on a different property. Some programs ask for housing history on other financed properties, not just the one being refinanced. An investor with several mortgages may need histories on more than one loan.
Mortgages not on credit. For privately serviced loans, lenders may ask for cancelled checks or bank statements instead of a credit-report history.
Servicer coding errors. The CFPB and CSBS consumer forbearance guide describes how an account should be reported in each case: current before, delinquent before, or brought current during. If your tradeline doesn’t match that, raise it with the servicer and the credit bureaus early.
Agency rules versus non-QM. Agency programs have used a short post-forbearance payment count. That does not carry over to bank statement lending. Lenders set their own overlays, and some are stricter than the agency minimum.
Also, the protective CARES Act reporting rules have since expired, so a non-pandemic forbearance never had the same statutory reporting shield.
How Do the Rules Vary by Program?
Widely. Across our wholesale network, some programs treat a completed event more lightly once enough time has passed, while stricter overlays want a longer clean run. The common thread is that the clock runs from the end of the event, not the beginning. A few more clean months can move a file into a better tier, which makes timing one of the few things you actually control.
Leverage is where this lands in practice. On a primary residence, bank statement purchase and rate-term loans reach up to 90% LTV through select lenders, and stronger files earn the top of that range. Owner-occupied cash-out on a primary residence tops out at up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio. A second home cash-out reaches up to 75% LTV. Investment property cash-out tops out around 75% LTV. A recent housing event can pull a file below these ceilings or limit cash-out. Loan sizes run roughly $125,000 to $3,500,000, with reserves commonly around six months of the housing payment. Every file is underwritten individually, and none of this is a commitment to lend.
Occupancy also decides the paperwork. An owner-occupied refinance is a consumer mortgage with consumer disclosures. A bank statement loan on a non-owner-occupied rental is business-purpose and handled differently. Confirm which applies to your property.
Investors who want to move the loan a different way might also read about switching statement periods when you refinance a bank statement loan. And if your rental income is the stronger story than your personal deposits, a DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. The complete DSCR loans guide explains when that route fits better.
Common Mistakes and Red Flags
- Letter and credit report disagree. The LOE says one date; the servicer record says another.
- Undisclosed deferrals. A deferral that appears on the title or servicer record but not in your letter.
- Unlabeled reinstatement deposits. Funds that look like income in the statement set.
- Assuming no documents are needed because you kept paying. You still have to prove it.
- Treating forbearance as forgiveness. The balance remains due, and underwriters read it that way.
Frequently Asked Questions
Does a past pandemic forbearance disqualify me from a bank statement refinance?
Not automatically. Lenders judge it on how it ended, how long ago, and what your payment record looks like since. A clean, documented exit with a run of on-time payments is a very different file from a recent modification.
Do I need a letter of explanation?
Most files include one. Keep it to the cause, the resolution, and what has changed. Attach the servicer documents that back every date.
Does the forbearance reduce my qualifying income?
No. Income comes from your averaged deposits. The forbearance is reviewed under housing history, though lower deposits during the hardship period can still affect the average if they fall in the statement window.
What if I kept making payments during the forbearance?
Prove it. Show the statement lines and the servicer’s payment history, since the credit file may not reflect it clearly.
How long do I have to wait after the forbearance ends?
It depends on the program, the event type and your credit. Waiting periods run from the end of the event, so a few more clean months can improve your tier.
You can reach the team at 828-256-2183.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps self-employed and high-net-worth borrowers in 16 states qualify on bank statements, a profit-and-loss statement, 1099s or liquid assets instead of tax returns, through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Nolo: Credit Protections Under the CARES Act
2. HUD Mortgagee Letter 2020-30
3. CFPB and CSBS consumer forbearance guide
This article is part of Lendmire’s bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Finance a 2-4 Unit Rental Using Bank Statement Income · Can a Franchise Owner Use a Bank Statement Loan? · Portfolio DSCR vs Bank Statement Loan for a 1099 Contractor
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.