Only 5 Percent of Homeowners Approved for Forbearance Couldn't Pay Mortgage Without It, Survey Finds

Only five percent of homeowners who were approved for a mortgage forbearance agreement couldn't pay their mortgage without it, according to a recent study.

The survey, conducted by Lending Tree, also found that 88.8 percent of people who applied for forbearance and earned over $100,000 last year were approved, compared to the 50 percent of people who were approved that made between $25,000 and $35,000 annually. However, 75 percent of people making less than $25,000 were approved.

Mortgage forbearance is when a lender allows homeowners a period of relief in which they will either have reduced payments or no payments altogether for the length of the agreement. All monies not paid to lenders are still owed by homeowners and must be paid back eventually, depending on the terms of the agreement.

The federal CARES Act included a provision to help Americans with federally backed mortgages struggling to make ends meet by allowing them to apply for mortgage forbearance that could potentially pause payments for up to 12 months. Homeowners with federally backed mortgages simply need to request the forbearance and say they need it due to suffering financial hardship as a direct or indirect result of the novel coronavirus pandemic, according to a fact sheet released by the Department of Housing and Urban Development.

"Under the CARES Act, borrowers are entitled to an initial forbearance period of up to 180 days, upon a borrower's request. Also, upon a borrower's request, the forbearance must be extended for up to an additional 180 days. A borrower can, at any time the borrower chooses, shorten the forbearance and resume repayment of the loan," the HUD fact sheet states. Federally backed mortgages include loans made through the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture.

The LendingTree survey, which did not specify how many people participating in the questionnaire had federally backed mortgages, also found that 26.2 percent of those who received forbearance could have paid their mortgage, but would have had to skip other essential bills. This means that roughly 70 percent of those who received forbearance did not necessarily need it, and the survey found they felt guilty about it.

"The main reason that those almost 70 percent who said they applied for forbearance anyway said they just wanted a break from their monthly payment," Brianna Wright, a senior consumer research specialist at LendingTree, told WTOP Radio, located in Washington, D.C.

"There was definitely a level of guilt. We found about a third felt really, really guilty about it and another 38 percent felt a little bad about it. I think that's because asking for help definitely isn't easy and there can be a level of shame or embarrassment associated with it, even when you need the help. So that is going to be amplified when deep down you know you didn't really need that forbearance," Wright said.

Megan Greuling, the director of public relations and communications for LendingTree, told Newsweek in an email she believes homeowners who applied for forbearance wanted "wiggle room" due to the current economic climate during the COVID-19 pandemic.

"I think one thing to keep in mind is that the pandemic has created so much uncertainty and instability. Even though homeowners may not have needed a forbearance, it's likely that homeowners wanted some wiggle room in case they needed extra cash, had additional expenses or thought their income may be at risk," Greuling said

The LendingTree survey polled 1,305 homeowners from April 28-May 1.

President Trump Signs Coronavirus Stimulus Bill In The Oval Office
WASHINGTON, DC - MARCH 27: U.S. President Donald Trump signs H.R. 748, the CARES Act in the Oval Office of the White House on March 27, 2020 in Washington, DC. Earlier on Friday, the U.S. House of Representatives approved the $2 trillion stimulus bill that lawmakers hope will battle the the economic effects of the COVID-19 pandemic. (Photo by Erin Schaff-Pool/Getty Images) Erin Schaff-Pool/Getty