Individual Borrower Motivations Surrounding Mortgage Forbearance Take-up and Exit

Justin Contat, William Doerner, Michael Seiler () and Scott Weiner

No 24-11, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: Borrower perceptions and beliefs about the future influence mortgage forbearance decisions. Using a proprietary dataset combining administrative mortgage records with borrower surveys, we find subjective expectations regarding forbearance uncertainty and financial knowledge help predict forbearance participation under the CARES Act alongside traditional underwriting variables. While precautionary motives seemingly drive decisions, a closer look reveals the importance of realized work and personal changes. Additionally, actual need and uncertainty about resolution options cause greater difficulty resuming payments when exiting forbearance. These findings highlight the benefits of using contemporaneous, subjective information during crises and emphasize the need for behavioral insights in policy design.

Keywords: behavioral; consumer finance; forbearance; mortgage; policy (search for similar items in EconPapers)
JEL-codes: C35 D10 G01 G18 G28 H12 R20 R30 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2024-12
New Economics Papers: this item is included in nep-ure
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