Final answer:
The answer is d) Only through refinancing. Under forbearance, the lender can potentially recoup the reduced loan amount by offering the borrower a refinanced loan with a higher principal.
Step-by-step explanation:
The answer to the question is d) Only through refinancing.
Under forbearance, the lender may temporarily reduce or suspend the borrower's loan payments. However, this does not mean that the lender loses the money permanently. The lender can potentially make that money back by refinancing the loan. Refinancing refers to the process of replacing an existing loan with a new loan that has different terms and conditions, including a new principal balance. Forbearance is a temporary postponement or reduction of payments, and it generally involves an agreement that can include terms on how the lender will recoup the postponed amounts. For instance, if the borrower is a firm with a record of high profits, the lender might anticipate that the borrower will catch up on the reduced principal in the future, especially if interest rates in the economy have fallen and the loan's value has increased.
For example, if a borrower's loan principal is reduced under forbearance, the lender can offer the borrower a refinanced loan with a higher principal so that the lender can recoup the reduced amount over time.