CLFP Collections Practice Exam

Both forbearance and transfer of a loan to a new borrower are ways a lender can address delinquency without rushing to foreclosure. They are alternative collection practices because they offer different paths to resolve the loan: forbearance temporarily pauses or reduces payments to help the borrower through hardship, while transfer/assumption moves the obligation to a new borrower who takes on the loan. They aren’t the same process—one keeps the same borrower with modified terms, the other changes who is responsible for the debt. They don’t always reduce what’s owed; forbearance leaves the principal and may extend the payoff period, and transfer/assumption may or may not reduce the balance depending on terms and who assumes the loan. They also don’t both avoid credit checks; some forbearance programs require hardship verification, and transfer/assumption typically involves underwriter review for the new borrower. So labeling them as alternative collection practices is the most accurate description.