"Policymakers Should Maintain Forbearance but Fix Its Costs." [1]
That is the title of a new brief published by the Urban Institute’s Housing Finance Policy Center. Research associates Michael Neal, [2]Linna Zhu, and [3]Faith Schwartz [4] explain that mortgage performance following Hurricane Katrina suggests that this pandemic (which resembles a natural disaster in ways) will increase delinquencies.
They go on to report that public policy can help lessen its impact on foreclosures. It also noted that the negative impact of a disaster disproportionately targets Black and Hispanic borrowers, thus, the potential policies would have a large positive impact on this group.
"Echoing the Great Recession, the pandemic has heightened the risk of mortgage delinquencies and resulted in a tighter mortgage credit box, which may have severe long term consequences, particularly for current and would-be Black and Hispanic homeowners," the researchers wrote. "This brief explains that mortgage performance following Hurricane Katrina suggests that this pandemic--which also has shades of a natural disaster--will increase delinquencies, but public policy can mute its impact on foreclosures. Foreclosure moratoriums and institutional forbearance have indeed helped homeowners keep their homes, to date, but specific forbearance policies have also contributed to the tightening of the mortgage credit box. In debating the extension of forbearance as part of a broader package, policymakers should recognize its benefits while working to maintain responsible access to mortgages."
The brief comes from the Mortgage Markets COVID Collaborative [5] (MMCC), a group convened by the Urban Institute last March "to bring together a wide range of experts and stakeholders to share data and discuss how the mortgage market’s response to the current pandemic can ensure equity, inclusion, and sustainability for homeowners."
According to a spokesperson for the Urban Institute, the MMCC goals are "to produce a shared repository of data, research, and policy proposals," as well as to "increase understanding among all participants of the existing data and research and of the concerns and perspectives of industry and community stakeholders."