Intermediation frictions in debt relief: Evidence from CARES Act forbearance

You Suk Kim, Donghoon Lee, Tess Scharlemann and James Vickery

Journal of Financial Economics, 2024, vol. 158, issue C

Abstract: We study how intermediaries – mortgage servicers – shaped the implementation of mortgage forbearance during the COVID-19 pandemic and use servicer-level variation to trace out the causal effects of forbearance on borrowers. Forbearance provision varied widely across servicers. Small servicers, nonbanks, and especially nonbanks with small liquidity buffers, facilitated fewer forbearances and saw a higher incidence of forbearance-related complaints. Easier access to forbearance substantially increased mortgage nonpayment but also reduced delinquencies outside of forbearance. Part of the liquidity from forbearance was used to reduce credit card debt, but most was saved or used for nondurable consumption.

Keywords: Mortgage; Forbearance; Liquidity; Nonbank; CARES Act; COVID-19 (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:158:y:2024:i:c:s0304405x24000965

DOI: 10.1016/j.jfineco.2024.103873

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