Lessons Learned from Mortgage Borrower Policies and Outcomes during the COVID-19 Pandemic

Gerardi, Kristopher; Lambie-Hanson, Lauren; Willen, Paul S.

doi:10.29338/ph2022-09

Journal Article

Lessons Learned from Mortgage Borrower Policies and Outcomes during the COVID-19 Pandemic

Abstract: This article evaluates how the most important policy responses to the COVID-19 pandemic affected the US mortgage market. In particular, we consider the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020; the follow-on American Rescue Plan (ARP) Act of 2021, which extended many of the provisions in the CARES Act; and the Federal Reserve's large-scale asset purchase (LSAP) program that was announced in March 2020. Our analysis considers both the aggregate effects and the distributional effects of these policies on mortgage borrowers. Overall, we find that pandemic-era forbearance worked very well in reducing foreclosures and mortgage delinquencies for all borrowers, better than the mortgage modification programs of the Great Recession, both because there were fewer restrictions and because the economic environment was so different. In contrast, while many borrowers benefited from the huge decline in mortgage rates caused, in part, by the LSAP program, Black and Hispanic borrowers were far less likely to benefit than White borrowers due to significantly slower refinancing speeds.

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

JEL Classification: G21; G51; E52; J15;

https://doi.org/10.29338/ph2022-09