Shadow Bank Distress and Household Debt Relief: Evidence from the CARES Act

Susan Cherry, Erica Jiang, Gregor Matvos, Tomasz Piskorski and Amit Seru

AEA Papers and Proceedings, 2022, vol. 112, 509-15

Abstract: Shadow banks service a substantial portion of household debt in the United States, including half of residential mortgages. They also funded and implemented a large portion of the CARES Act-driven debt relief. Despite uniform policy and similar borrowers, shadow banks offered debt forbearance at a significantly lower (27 percent) rate compared to traditional banks. Better-capitalized shadow banks offered forbearance at a much higher rate, and those with larger exposure to servicing related liquidity shocks reduced this exposure by selling their servicing rights. We highlight the fragility of shadow bank servicing during downturns that can impede the pass-through of debt relief to households.

JEL-codes: E32 G21 G32 G51 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/pandp.20221077

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