Inequality in the Time of Covid-19: Evidence from Mortgage Delinquency and Forbearance
Posted: 3 Jun 2021
Date Written: March, 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 modiﬁcation options for an estimated 2.8 million loans in forbearance, most with terms expiring by mid-year 2021.
Keywords: mortgage forbearance, inequality, COVID-19, loan modiﬁcations
JEL Classification: D12, D63, G21, G50
Suggested Citation: Suggested Citation