Authors: You Suk Kim, Donghoon Lee, Tess Scharlemann, and James Vickery
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Staff Reports
Intermediation Frictions in Debt Relief: Evidence from CARES Act Forbearance
Number 1035
October 2022
October 2022
JEL classification: G21, G23, G28
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.
Author Disclosure Statement(s)
You Suk Kim
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Board review policy.
Donghoon Lee
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Tess Scharlemann
I, Tess Scharlemann, declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Board of Governors.
James Vickery
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of Philadelphia review policy.
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Board review policy.
Donghoon Lee
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Tess Scharlemann
I, Tess Scharlemann, declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Board of Governors.
James Vickery
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of Philadelphia review policy.
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