Working Paper

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

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 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;

https://doi.org/10.21799/frbp.wp.2021.09

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2021-03-02

Number: 21-09

Note: REVISED 2022-02-03