The Housing Scene

Homeowners Also Game the System

Many Homeowners Who Applied for Forbearance May Not Have Needed It

Lew Sichelman

Much has been written about government abuse during the COVID-19 pandemic. Plenty has been said, too, about how some well-heeled businesses have snatched up government loans intended for smaller, local outfits that really needed the help. But it seems some homeowners are scamming the system, as well. 

According to Black Knight, a data analytics company, some 4.75 million owners have sought relief from their lenders under terms of the Coronavirus Aid, Relief and Economic Security Act and/or programs offered by lenders. 

Every borrower who qualifies under the CARES Act can suspend their house payments for up to a year. The forgiven payments must be paid back, of course  in many cases, added on to the end of the loan. 

Though forbearance can be a blessing for those struggling to stay afloat, a new LendingTree survey conducted by Qualtrics suggests that most people who have received forbearance may not have actually needed it. At least not right away. According to the survey, 4 out of every 5 borrowers who applied for relief were cleared. But only 5 percent told LendingTrees pollsters that they would not have been able to make their next mortgage payment without help. 

Forbearance Helped Pay Many Bills 

The other 95 percent? About a fourth of them said they could have paid their mortgages, but wouldve needed to skip their car loan, groceries, utilities and other recurring bills. And although the survey didnt say, some might have been looking ahead a month or two, to the point when theyd be out of money to pay any bills, let alone their home loan. 

But a whopping 70 percent said they couldve made their payments, but just wanted a break from them. 

An analysis by Black Knight found similar results, though not quite as blatant. Of the owners the firm counted in active forbearance at the end of April, 46 percent went ahead and made their full April house payment anyway. Thats roughly 1.4 million borrowers. 

Remember way back in late March, when lenders started allowing borrowers to skip payments? Relief was supposed to be for those who needed it. 

Were operating on the honor system, Mark Calabria, director of the Federal Housing Finance Agency, said in a television interview at the time. This is supposed to be limited to if youve lost your job, youve lost income … If you can pay your mortgage, please do so, because we really need to focus on the people who cant. 

Folks have been able to get away with essentially cheating because they didnt have to pull the wool over anyones eyes to do so. All they had to do was apply: Under the CARES Act, no one needs to prove a hardship. But 70 percent of recipients told LendingTree they just wanted a month or two  or three or four!  off. 

Who Feels Guilty? 

Some said they felt ashamed  as well they should, if they took what they didnt really need. But if their need was real, the shame was unwarranted.  

Asking for help isnt easy when you fall on hard times, said LendingTree economist Tendayi Kapfidze. 

Generally, women were more likely to feel not at all guilty about applying for help (44 percent) compared with men (25 percent). Almost 3 out of 4 Baby Boomers reported feeling no guilt at all, compared to 30 percent of Millennials and 20 percent of Gen Xers. 

Thats funny, because younger owners were more likely to apply for forbearance, according to the poll: About 36 percent of Millennials and 35 percent of Gen Xers sought help, compared with only 3.5 percent of Boomers. Which makes sense, as older owners are more likely to own their homes outright, Kapfidze explained.  

The survey also found that while women were less likely to seek forbearance than men, approval rates between the genders were similar. What wasnt similar? The approval rates between high-income borrowers and the rest of us. Of applicants with annual incomes above $100,000, the approval rate was nearly 89 percent. For applicants with incomes between $25,000 and $50,000, however, approval percentages were in the low 50s. 

One explanation, said Kapfidzemay be that lenders see higher-income earners as more likely to repay missed payments later down the line. 

Or maybe those applicants were just quicker. Or less honest. 

Some Landlords, Too 

While were on the topic of chicanery, it should also be noted that some landlords are scamming the system, too. According to a recent report by ProPublica, a nonprofit newsroom that investigates abuses of power, landlords in at least four states  Florida, Georgia, Oklahoma and Texas  have violated the CARES Acts eviction ban. 

Its impossible to know how widespread the violations are; there is no national database of eviction filings. They are typically handled in city or county courts, only some of which post cases online, making them difficult to track. But ProPublica suggests there are far more instances of people being thrown to the curb than it uncovered. 

The CARES Act bans eviction in all federally backed rental units nationwide  more than a quarter of the total. ProPublica chose the four states based on their populations, easy access to online records and an increasing number of new cases. Since its report, several of the landlords it flagged have rescinded their eviction filings. 

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at