Discussion Paper

Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19


Abstract: The COVID-19 pandemic was characterized by both high refinancing volumes and high rates of mortgage nonpayment. Refinancing activity differed significantly across racial and ethnic groups, and we show that the benefits from the lower interest rate environment were not shared equally. Compared to white borrowers, Black and Hispanic mortgage borrowers experienced higher rates of nonpayment, which reflected both a greater transition into nonpayment status for Black and Hispanic borrowers and a lower likelihood of resuming payments. However, strong house price appreciation in recent years, particularly in 2020, means that foreclosure risk is lower for past-due borrowers as compared to the 2007–10 period. In addition, borrowers in nonpayment have significantly higher credit scores now than in the 2007–10 period, in part thanks to the widespread availability of forbearance for federally backed mortgages.

Keywords: mortgage refinancing; mortgage repayment; home equity; racial inequality;

JEL Classification: G21; G51; E52; J15;

https://doi.org/10.29338/ph2021-06

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Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: Policy Hub

Publication Date: 2021-06-22

Number: 2021-06