Category: COVID-19

Update on student loan borrowers during payment suspension

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Updating a previous CFPB report, this blog documents increasing signs of financial strain through September 2022 among student loan borrowers who are expected to face monthly payments when federal forbearances end. It also tracks changes in other risk factors for which consumers are most likely to experience financial difficulties when the relief ends, depending on implementation of new debt cancellation proposals.

Thomas Conkling and Christa Gibbs, Office of Research Blog, Consumer Financial Protection Bureau

Let the rich be flooded: The distribution of financial aid and distress after hurricane harvey

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Comparing areas with and without flood insurance after Hurricane Harvey, this study finds evidence that mandatory flood insurance programs mitigated financial shocks where applicable. However, despite lender forbearances, federal disaster grants, and small business disaster loans, credit-constrained homeowners who lived in areas not subject to flood insurance mandates experienced a 20% increase in bankruptcies and a 13% increase in the share of debt in severe delinquency in flooded blocks relative to non-flooded areas.

Stephen B. Billings et al., Journal of Financial Economics

Wage Garnishment in the United States: New Facts from Administrative Payroll Records

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In the first comprehensive academic analysis of court-ordered wage garnishment, this study finds that garnishment rates nearly doubled from 2014 to 2019 due largely to increases in student loan collections. On average, 11 percent of gross earnings were remitted to creditors, raising concerns about whether unexpected garnishments may perpetuate a cycle of debt. Garnishments are most frequent in neighborhoods with higher percentages of Black residents and fewer college-educated workers, even controlling for income.

Anthony A. DeFusco, Brandon M. Enriquez, & Margaret B. Yellen

Credit Scores Since the COVID-19 Outbreak

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This paper analyzes the effect of forbearance programs and related credit reporting practices on consumers’ credit scores during early stages of the pandemic, using data from March through September 2020. Focusing mainly on mortgage forbearances, it finds evidence of a positive effect on consumers’ credit scores but concludes that broader improvements in credit card utilization rates particularly among consumers with low credit scores contributed more to general credit score improvements during the downturn.

Michal Kowalik, Lily Y. Liu, and Xiyu Wang; Federal Reserve Bank of Boston Supervisory Research and Analysis Working Papers 21-4

Lessons Learned from Mortgage Borrower Policies and Outcomes during the COVID-19 Pandemic

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This study analyzes the aggregate impacts of mortgage forbearances and the Federal Reserve’s large-scale asset purchase program through Q3 2021 with a particular eye toward effects on different racial and ethnic groups.

Kristopher Gerardi, Lauren Lambie-Hanson, and Paul Willen; Federal Reserve Bank of Boston Current Policy Perspectives

Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation During COVID-19

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This paper finds that mortgage refinancing benefits from lower interest rates during the pandemic have not been shared equally among racial and ethnic groups. Based on a sample of 5 million mortgages, the authors estimate that only 6% of Black borrowers and 9% of Hispanic borrowers refinanced between January and October 2020, compared with almost 12% of White borrowers. Among those who experienced distress during the peak months of May and June 2020, the percent who were still behind on their mortgage payments as of February 2021 was 9 percentage points higher among Black borrowers and 2.2 percentage points higher among Hispanic borrowers as compared to White borrowers.

Kristopher Gerardi et al., Policy Hub, Federal Reserve Bank of Atlanta

Government and Private Household Debt Relief During COVID-19

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This study finds that nearly 30% of total debt relief in response to the COVID-19 pandemic was provided by the private sector, with the balance provided pursuant to government mandates focusing on mortgage and student loans. Households with lower incomes and lower creditworthiness were more likely to obtain forbearance relief, as were households who live in areas with higher Black or Hispanic populations, high infection rates, and more severe economic deterioration. The authors caution that the winding down of forbearance measures and subsequent structuring of debt repayments may have a significant impact on household debt distress and the aggregate economy given the amount of accumulated postponed repayments.

Susan F. Cherry et al., National Bureau of Economic Research Working Paper No. 28357

Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program

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This study of loan-level Paycheck Protection Program data finds that despite a lag in approving several fintech lenders to participate in the program, such lenders provided disproportionate amounts of PPP funds in ZIP codes with fewer bank branches, lower incomes, and a larger minority share of the population, as well as in industries with little ex ante small-business lending. Fintechs’ role in PPP provision was also greater in counties where the economic effects of the COVID-19 pandemic were more severe.

Isil Erel & Jack Liebersohn, National Bureau of Economic Research Working Paper No. 27659

Measuring Evictions during the COVID-19 Crisis

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This paper analyzes weekly eviction filings for 44 jurisdictions in 11 states through July 7 compared to the same period in 2019. It finds that filings have returned to pre-pandemic levels in jurisdictions that were not subject to restrictions, and that activity has surged in jurisdictions that prohibited both filings and hearings immediately after the pandemic.​

Rebecca Cowin et al., Federal Reserve Bank of Cleveland

Private Precaution and Public Restrictions: What Drives Social Distancing and Industry Foot Traffic in the COVID-19 Era?

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This paper analyzes cell phone data from March through mid May, finding that private, self-regulating changes in behavior explained about 75% of the decline in foot traffic across most industries, while restrictive regulation (including school closures) had more influence on essential retail foot traffic and the fraction of cell phones that remained at home all day.

Christopher J. Cronin & William N. Evans, National Bureau of Economic Research Working Paper No. 27531

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