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

47 Pages Posted: 22 Feb 2021 Last revised: 31 Mar 2021

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

Date Written: February 20, 2021

Abstract

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

An, Xudong and Cordell, Larry and Geng, Liang and Lee, Keyoung, Inequality in the Time of COVID-19: Evidence from Mortgage Delinquency and Forbearance (February 20, 2021). 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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