Which statement is true about forbearance and transfer assumption in terms of approval?

Which statement is true about forbearance and transfer assumption in terms of approval?

• A. Forbearance requires credit approval.
• B. Forbearance and transfer both always require credit approval.
• C. Transfer Assumption typically subject to credit approval.
• D. Neither requires credit approval.

Answer: (C)

When a loan is transferred to a new borrower, the lender usually performs underwriting to verify the new borrower's ability to repay. This is why a transfer of the loan is typically subject to credit approval. The new borrower must meet the lender’s credit and income standards, debt-to-income ratio, and other underwriting criteria before the assumption is approved. Forbearance, by contrast, is a modification granted to the current borrower to temporarily reduce or postpone payments. It does not create a new borrower or require a full underwriting of a new credit profile, though the lender may still require documentation or confirmation of hardship. This distinction is why the transfer scenario is the one that normally involves credit approval.

When a loan is transferred to a new borrower, the lender usually performs underwriting to verify the new borrower's ability to repay. This is why a transfer of the loan is typically subject to credit approval. The new borrower must meet the lender’s credit and income standards, debt-to-income ratio, and other underwriting criteria before the assumption is approved.

Forbearance, by contrast, is a modification granted to the current borrower to temporarily reduce or postpone payments. It does not create a new borrower or require a full underwriting of a new credit profile, though the lender may still require documentation or confirmation of hardship. This distinction is why the transfer scenario is the one that normally involves credit approval.