研究 Forbearance for mortgages a short-term solution; savings programs for the long term

The pandemic caused by the novel coronavirus (Covid-19) has left 数百万 of Americans experiencing (at least temporary) job loss—and with it, disruptions to income. While unemployment insurance can help blunt the impact, a spike in mortgage delinquencies and defaults is expected to occur as families face their next mortgage payment in the coming weeks. The government and private sector have 采取措施 to temporarily halt foreclosures and evictions and to 提供 loan forbearance to borrowers impacted by the coronavirus. 

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Historically, for those who default on their mortgage, 我们发现 那 default is preceded by a drop in income—true across borrower income levels, the amount of home equity 那 a homeowner has, or their total debt-to-income ratio (DTI) at origination of the loan. The shorter the income disruption, the more likely individuals may be able to cut back on other expenditures or draw upon their savings and still pay their mortgage. The longer the severe economic disruptions continue, the more likely we are to see the number of defaults rise.

我们的 研究 on modification programs during the Great Recession showed 那 programs which increased borrower liquidity (through substantial monthly payment reduction) helped reduce default rates, while programs 那 reduced long-term debt did not. Mortgage forbearance programs being offered by public and private entities are a helpful intervention for those in need right now, providing a form of liquidity to families, and allowing them to prioritize food and other necessities in the immediate future.

Forbearance programs are not long term solutions or sustainable without government support. In the long run, mortgage savings programs like emergency mortgage reserve accounts, or other programs 那 encourage families to build savings, would be helpful in these types of scenarios, which are expected to last up to a few months. 考虑到 importance of liquidity on families’ ability to weather income volatility, a mortgage savings account in which borrowers are encouraged to hold a few months-worth of mortgage payments may be a successful way to align interests across the system: helping families to bridge considerable short-term fluctuations, and reducing disruptions to the mortgage system.

- 法雷尔, President and 首席执行官

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