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

66 Pages Posted: 22 Feb 2021 Last revised: 22 Jan 2022

See all articles by Xudong An

Xudong An

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Larry Cordell

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Liang Geng

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Keyoung Lee

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Multiple version iconThere are 2 versions of this paper

Date Written: January 21, 2022

Abstract

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

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

Xudong An (Contact Author)

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

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Larry Cordell

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

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Liang Geng

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

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Keyoung Lee

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

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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