Loan Delinquency Projections for COVID-19

16 Pages Posted: 16 Jul 2020

See all articles by Grey Gordon

Grey Gordon

Federal Reserve Banks - Federal Reserve Bank of Richmond

John Bailey Jones

Federal Reserve Bank of Richmond; SUNY at Albany - School of Business

Date Written: April 1, 2020

Abstract

The authors forecast the effects of the COVID-19 pandemic on loan delinquency rates under three scenarios for unemployment and house price movements. In the baseline scenario, their model predicts that loan delinquency rises from 2.3 percent in 2019 to a peak of 3.9 percent in 2025 with a total of $580 billion in write-offs. In 2021, absent policy intervention, the model predicts that delinquency would be 3.1 percent. However, mortgage forbearance, student loan forbearance, and fiscal transfers keep delinquency from increasing in 2021. The greatest reductions in delinquency are achieved through mortgage forbearance and student loan forbearance, with fiscal transfers playing a smaller role. In the authors' adverse (favorable) scenario, loan delinquency peaks at 8.1 percent (2.8 percent) and write-offs total $1.1 trillion ($420 billion).

Suggested Citation

Gordon, Grey and Jones, John B., Loan Delinquency Projections for COVID-19 (April 1, 2020). FRB Richmond Working Paper No. 20-02, Available at SSRN: https://ssrn.com/abstract=3650562 or http://dx.doi.org/10.21144/wp20-02

Grey Gordon (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

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John B. Jones

Federal Reserve Bank of Richmond ( email )

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United States
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HOME PAGE: http://www.albany.edu/~jbjones

SUNY at Albany - School of Business ( email )

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