Inequality in the Time of COVID-19: Evidence from Mortgage Delinquency and Forbearance
47 Pages Posted: 22 Feb 2021 Last revised: 31 Mar 2021
Date Written: February 20, 2021
Using a novel database that combines mortgage servicing records, credit-bureau data and loan application information, we show that lower-income and minority borrowers have significantly higher nonpayment rates during the COVID-19 Pandemic, even after controlling for conventional risk factors. A difference-in-differences analysis shows how much the pandemic has exacerbated income and racial inequalities. We then find that government and private-sector forbearance programs have mitigated these inequalities in the near term, as lower-income and minority borrowers have taken up the short-term debt relief at higher rates. Finally, we examine longer-term solutions for identifying and resolving an estimated 2.8 million mortgage loans with forbearance terms expiring soon.
Keywords: COVID-19, mortgage forbearance, mortgage delinquency, inequality, loan modification
JEL Classification: D63, D12, G21, G28
Suggested Citation: Suggested Citation