Inequality in the Time of COVID-19: Evidence from Mortgage Delinquency and Forbearance

Using novel data, we show that during the COVID-19 pandemic minority and lower-income borrowers experienced significantly more financial distress. We quantify how much the pandemic has exacerbated inequalities with a difference-in-differences analysis. We then show that forbearance programs mitigated inequalities as minority and lower-income borrowers took up forbearances at higher rates, reducing their delinquency rates more than White and higher-income borrowers in 2020. Finally, we show that minority and lower-income borrowers are more likely to fall into delinquency and default after exiting forbearance and that fast-tracking FHA modifications with 40-year terms could best help these borrowers obtain longer term debt relief.

Keywords: COVID-19, mortgage forbearance, mortgage delinquency, inequality, loan modification

JEL Classification: D63, D12, G21, G28

Suggested Citation: Suggested Citation

An, Xudong and Cordell, Larry and Geng, Liang and Lee, Keyoung, Inequality in the Time of COVID-19: Evidence from Mortgage Delinquency and Forbearance (January 21, 2022). Available at SSRN: https://ssrn.com/abstract=3789349 or http://dx.doi.org/10.2139/ssrn.3789349