70% of Homeowners Seeking Mortgage Relief Don’t Really Need Help

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More than 4 million homeowners have now obtained forbearance on their mortgages. But in 70% of these cases? The owners didn’t really need a vacation.

According to a new investigation out of nearly 1,300 homeowners, nearly 70% of homeowners now forborne say the move was unnecessary – at least financially speaking. In fact, only 5% of people with forbearance say they wouldn’t be able to make their mortgage payments without it.

So what’s causing the mortgage relief rush then? Data from the Mortgage Bankers Association shows that more than 8% of all mortgages are now forborne, allowing homeowners to withhold their monthly payments for up to a full 12 months.

Apparently, many of these homeowners “just wanted a break from their normal payments,” according to LendingTree’s findings. This mindset was most common among Millennials and Gen X homeowners, only 4.3% of whom were in actual need of financial assistance.

While taking a break from a high payment for a few months can be a nice bonus, the move is not without consequences. On the one hand, many homeowners feel gravely guilty for asking for forbearance. A third say they feel “a lot” of guilt, while almost 40% say they feel at least “a little” bad about it.

Unfortunately, these nagging feelings aren’t the only drawbacks. While forbearance loans cannot be reported late to credit bureaus (the CARES law prohibits it), it is often noted in the comments section of your credit report.

While this doesn’t negatively impact your credit score, it could give would-be lenders a break the next time you apply for a loan or financial product.

Having a loan in forbearance can also make refinancing difficult. According to the Federal Housing Finance Agency, homeowners with loans guaranteed by Fannie Mae or Freddie Mac cannot refinance until their forbearance ends and they have made at least three full months of payments.

Since mortgage rates are constantly fluctuating, it could be difficult for homeowners to take advantage of today’s record rates. The current average 30-year mortgage rate is only 3.28%, according to Freddie Mac. A year ago, they stood at 4.07%, almost a point higher.

“Forbearance is really an emergency break,” says Kate Bulger, director of business development at Money Management International. “You don’t want to use it unless you really need it, and if you need it, you absolutely have to use it. If you need forbearance to avoid missing mortgage payments and running the risk of foreclosure, so definitely use it.

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