We found that single borrowers are more apt to request forbearance than coborrowers, holding other characteristics constant. We looked at the likelihood of forbearance program take-up for single borrowers and coborrowers. Jakucionyte and Singh (2020) show that the default rate for single borrowers increases during economic downturns, as a higher incidence of unemployment during economic downturns makes single borrowers more susceptible to default. These stylized facts are documented by previous studies ( Jakucionyte and Singh, 2020 Tzioumis, 2017). Moreover, single borrowers are more likely to be Black or Hispanic and slightly younger.ĭetailed loan-level GSE data show that single borrowers have weaker credit profiles than coborrowers, indicated by lower FICO scores, higher loan-to-value (LTV) ratios, and higher debt-to-income (DTI) ratios. Using 2021 Home Mortgage Disclosure Act data, we show that these two groups have different characteristics single borrowers have lower incomes, lower property values, and smaller loans. In this paper, we examine the impact of forbearance on two groups of mortgage borrowers: single borrowers and coborrowers. ![]() The forbearance program mitigated inequalities, as Black and Hispanic borrowers took up forbearance at higher rates. An et al. (2022) show the pandemic has exacerbated the inequalities between low-income borrowers and high-income borrowers and between Black and Hispanic borrowers and their white counterparts. Davydiuk and Gupta (2021) show that high-income individuals were able to stay at home and limit their mobility more than low-income individuals during the pandemic low-income individuals with high debt burdens who could not work from home but needed income to meet their debt burdens contributed significantly to this inequality. Chakrabarti and Nober (2020) show that Black and Hispanic households have been far more affected by COVID-19 than have white households, and low-income communities have been more affected than high-income communities. Several studies have documented the pandemic's effects on mortgage borrowers and shown the positive impacts of forbearance. The pandemic forbearance policy was the first large-scale application of forbearance. Although mortgage servicers without a federal guarantee or insurance are not required to offer similar relief on these mortgages, many choose to do so. This was codified for all federal mortgages in the Coronavirus Aid, Relief and Economic Security (CARES) Act, which became law less than two weeks later. These programs allowed mortgage borrowers to pause their mortgage payments for a specified period with minimal documentation. ![]() In March 2020, just after the virus hit, the US, the Department of Housing and Urban Development (HUD) and the GSEs announced that their more flexible forbearance and modification policies that apply to natural disasters would apply during the pandemic. The 2008 financial crisis also highlighted the need for policymakers to move quickly.īoth these lessons were taken to heart and applied to the COVID-19 pandemic. ![]() The 2008 financial crisis highlighted the need for a standardized loss mitigation toolkit, which was initially developed during the financial crisis and improved as the government agencies and government-sponsored enterprises (GSEs) were forced to deal with the effects of several natural disasters. Adding to the confusion, servicers often added delinquent interest rates and fees to the balance. As a result, borrowers were often confused about when they were supposed to repay this temporary relief and the payment shock they would experience. Short-term assistance programs such as repayment plans and forbearance plans were available on an ad-hoc basis, with each servicer offering its own terms. Before the 2008 crash, there was no standardized loss mitigation toolkit. The Great Recession exposed major weaknesses in the mortgage servicing infrastructure.
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