70% Of Homeowners Seeking Mortgage Relief Don’t Actually Need The Help

More than 4 million homeowners have now been granted forbearance on their mortgage loans. But in 70% of those cases? The homeowners didn’t actually need the break.

According to a new study from LendingTree

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, almost 70% of homeowners now in forbearance say the move wasn’t necessary — financially speaking, at least. In fact, only a mere 5% of those granted forbearance say they wouldn’t be able to make their mortgage payments without it.

So what’s causing the rush toward mortgage relief, then? Data from the Mortgage Bankers Association shows that more than 8% of all mortgage loans are now in forbearance, allowing homeowners to pause monthly payments for up to 12 full months.

Apparently, many of these homeowners simply “wanted a break from their normal payments,” according to LendingTree’s findings. This mindset was most common with Millennial and Generation X homeowners — of whom just 4.3% actually needed the financial help.

While the break from a hefty payment for a few months may be a nice perk, the move isn’t without consequences. For one, many homeowners are feeling serious guilt about requesting forbearance. A third say they feel “a lot” of guilt, while almost 40% say they feel at least “a little” bad about it.

Unfortunately, those nagging feelings aren’t the only drawbacks. Though loans in forbearance can’t be reported as late to credit reporting agencies (the CARES Act prohibits it), it often does get noted in the comments section of your credit report. 

While this won’t impact your credit score negatively, it could give future lenders pause next time you apply for a loan or financial product.

Having a loan in forbearance can also make it difficult to refinance. According to the Federal Housing Finance Agency, homeowners with Fannie Mae- or Freddie Mac-backed loans can’t refinance until their forbearance ends and they’ve made at least three full months of payments.

As mortgage rates are constantly in flux, this might make it difficult for homeowners to capitalize on today’s record-low rates. The current average rate on 30-year mortgage loans is just 3.28%, according to Freddie Mac. One year ago, they sat at 4.07% — nearly a full point higher.

“If consumers have the ability to pay and are thinking about a forbearance, they should carefully consider whether forbearance is the right option,” says Kristina Morales, a Houston-area real estate agent. “If they have plans to purchase or refinance their home in the next 12 months, they should avoid a forbearance.”