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

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