Intermediation Frictions in Debt Relief: Evidence from CARES Act Forbearance

You Suk Kim, Donghoon Lee, Tess C. Scharlemann and James Vickery ()
Additional contact information
You Suk Kim: https://www.federalreserve.gov/econres/you-suk-kim.htm
Tess C. Scharlemann: https://www.federalreserve.gov/econres/tess-c-scharlemann.htm

No 1035, Staff Reports from Federal Reserve Bank of New York

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 effect of forbearance on borrowers. Forbearance provision varied widely across servicers. Small servicers and nonbanks, 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; nonbanks; CARES Act; Coronavirus Aid Relief and Economic Security (CARES) Act; COVID 19 (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Pages: 69
Date: 2022-10-01
New Economics Papers: this item is included in nep-ban and nep-ure
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Citations: View citations in EconPapers (2)

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Working Paper: Intermediation Frictions in Debt Relief: Evidence from CARES Act Forbearance (2022)
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