COVID-19 Mortgage Relief—The Role of Income Support
Abstract: The COVID-19 pandemic has led to a large number of furloughs, layoffs, reductions in hours worked, and wage cuts. Anticipating that many homeowners would consequently have problems paying their monthly mortgage bill, the U.S. Department of Housing and Urban Development ordered all mortgage servicers of federally backed debt to provide forbearance to any homeowners affected by the crisis. In addition, bank regulators encouraged lenders to forbear and restructure mortgages for borrowers affected by the shutdown, actions that staved off an immediate wave of foreclosures. At the end of the forbearance window, borrowers will likely be offered a series of repayment schemes: starting with a period of catch-up payments, then moving to extended terms on their mortgage or possibly even rate reductions. However, if the borrower has not returned to work, paying for what is effectively a new mortgage obviously poses a challenge. Options such as creating a modified repayment plan, lowering the mortgage interest rate, or extending the term of the loan might not be enough for a borrower who has experienced a substantial income loss.
Provider: Federal Reserve Bank of Atlanta
Publication Date: 2020-05-27