The Color of Forbearance in Private Label Mortgages: Consequences of Exclusion from CARES Act

67 Pages Posted: 28 Sep 2020 Last revised: 30 Jan 2023

Date Written: November 22, 2022

Abstract

I document disparate treatment towards African Americans with private label mortgages using proprietary servicer call transcripts. This is primarily to recoup the delay in cashflow from strategic forbearance applications from borrowers with Gov-backed loans at the inception of the CARES Act. While reaching out to the borrowers to inform about the CARES Act, the servicers dissuaded the African Americans with private label mortgages from availing forbearance, 10.8\% less than White Americans. No loan modification or relief were offered to the African Americans. This disparate treatment permeated from forbearance applications to the actual take-up of approved forbearance.

Keywords: Selective Verification, Race, Forbearance, Machine learning, NLP, COVID-19

JEL Classification: R38, R28, K32, J15, H12, H81, G01, E61, E63, D80, D61, D12, D18

Suggested Citation

Bandyopadhyay, Arka Prava, The Color of Forbearance in Private Label Mortgages: Consequences of Exclusion from CARES Act (November 22, 2022). Available at SSRN: https://ssrn.com/abstract=3701130 or http://dx.doi.org/10.2139/ssrn.3701130

Arka Prava Bandyopadhyay (Contact Author)

University of Miami ( email )

Coral Gables, FL 33124
United States

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