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44 posts on "Mortgages"May 20, 2021Consumer Credit Demand, Supply, and Unmet Need during the Pandemic
It is common during recessions to observe significant slowdowns in credit flows to consumers. It is more difficult to establish how much of these declines are the consequence of a decrease in credit demand versus a tightening in supply. In this post, we draw on survey data to examine how consumer credit demand and supply have changed since the start of the COVID-19 pandemic. The evidence reveals a clear initial decline and recent rebound in consumer credit demand. We also observe a modest but persistent tightening in credit supply during the pandemic, especially for credit cards. Mortgage refinance applications are the main exception to this general pattern, showing a steep increase in demand and some easing in availability. Despite tightened standards, we find no evidence of a meaningful increase in unmet credit need.
May 19, 2021What Happens during Mortgage Forbearance?
As we discussed in our previous post, millions of mortgage borrowers have entered forbearance since the beginning of the pandemic, and over 2 million remain in a program as of March 2021. In this post, we use our Consumer Credit Panel (CCP) data to examine borrower behavior while in forbearance. The credit bureau data are ideal for this purpose because they allow us to follow borrowers over time, and to connect developments on the mortgage with those on other credit products. We find that forbearance results in reduced mortgage delinquencies and is associated with increased paydown of other debts, suggesting that these programs have significantly improved the financial positions of the borrowers who received them.
Keeping Borrowers Current in a Pandemic
Federal government actions in response to the pandemic have taken many forms. One set of policies is intended to reduce the risk that the pandemic will result in a housing market crash and a wave of foreclosures like the one that accompanied the Great Financial Crisis. An important and novel tool employed as part of these policies is mortgage forbearance, which provides borrowers the option to pause or reduce debt service payments during periods of hardship, without marking the loan delinquent on the borrower’s credit report. Widespread take-up of forbearance over the past year has significantly changed the housing finance system in the United States, in different ways for different borrowers. This post is the first of four focusing attention on the effects of mortgage forbearance and the outlook for the mortgage market. Here we use data from the New York Fed’s Consumer Credit Panel (CCP) to examine the effects of these changes on households during the pandemic.
Posted at 11:45 am in Banks, Credit, Financial Institutions, Household, Housing, Mortgages, Pandemic, Recession | Permalink | Comments (0)April 5, 2021Do People View Housing as a Good Investment and Why?
Housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class. Yet there is limited understanding of how households view housing as an investment relative to financial assets, in part because of their differences beyond the usual risk and return trade-off. Housing offers households an accessible source of leverage and a commitment device for saving through an amortization schedule. For an owner-occupied residence, it also provides stability and hedges for rising housing costs. On the other hand, housing is much less liquid than financial assets and it also requires more time to manage. In this post, we use data from our just released SCE Housing Survey to answer several questions about how households view this choice: Do households view housing as a good investment choice in comparison to financial assets, such as stocks? Are there cross-sectional differences in preferences for housing as an investment? What are the factors households consider when making an investment choice between housing and financial assets?
Posted at 11:00 am in Banks, Household, Household Finance, Housing, Mortgages | Permalink | Comments (2)February 17, 2021Mortgage Rates Decline and (Prime) Households Take Advantage
Today, the New York Fed’s Center for Microeconomic Data reported that household debt balances increased by $206 billion in the fourth quarter of 2020, marking a $414 billion increase since the end of 2019. But the COVID pandemic and ensuing recession have marked an end to the dynamics in household borrowing that have characterized the expansion since the Great Recession, which included robust growth in auto and student loans, while mortgage and credit card balances grew more slowly. As the pandemic took hold, these dynamics were altered. One shift in 2020 was a larger bump up in mortgage balances. Mortgage balances grew by $182 billion, the biggest uptick since 2006, boosted by historically high volumes of originations. Here, we take a close look at the composition of mortgage originations, which neared $1.2 trillion in the fourth quarter of 2020, the highest single-quarter volume seen since our series begins in 2000. The Quarterly Report on Household Debt and Credit and this analysis are based on the New York Fed’s Consumer Credit Panel, which is itself based on anonymized Equifax credit data.
Posted at 11:00 am in Credit, Foreclosure, Great Recession, Household, Household Finance, Housing, Mortgages, Pandemic, Student Loans | Permalink | Comments (0)November 17, 2020Following Borrowers through Forbearance
Today, the New York Fed’s Center for Microeconomic Data reported that total household debt balances increased slightly in the third quarter of 2020, according to the latest Quarterly Report on Household Debt and Credit. This increase marked a reversal from the modest decline in the second quarter of 2020, a downturn driven by a sharp contraction in credit card balances. In the third quarter, credit card balances declined again, even as consumer spending recovered somewhat; meanwhile, mortgage originations came in at a robust $1.049 trillion, the highest level since 2003. Many of the efforts to stabilize the economy in response to the COVID-19 crisis have focused on consumer balance sheets, both through direct cash transfers and through forbearances on federally backed debts. Here, we examine the uptake of forbearances on mortgage and auto loans and its impact on their delinquency status and the borrower’s credit score. This analysis, as well as the Quarterly Report on Household Debt and Credit, is based on anonymized Equifax credit report data.
August 18, 2020Debt Relief and the CARES Act: Which Borrowers Benefit the Most?
COVID-19 and associated social distancing measures have had major labor market ramifications, with massive job losses and furloughs. Millions of people have filed jobless claims since mid-March—6.9 million in the week of March 28 alone. These developments will surely lead to financial hardship for millions of Americans, especially those who hold outstanding debts while facing diminishing or disappearing wages. The CARES Act, passed by Congress on April 2, 2020, provided $2.2 trillion in disaster relief to combat the economic impacts of COVID-19. Among other measures, it included mortgage and student debt relief measures to alleviate the cash flow problems of borrowers. In this post, we examine who could benefit most (and by how much) from various debt relief provisions under the CARES Act.
Posted at 7:00 am in Demographics, Education, Household Finance, Housing, Inequality, Mortgages, Recession, Regulation, Student Loans | Permalink | Comments (2)August 17, 2020Are Financially Distressed Areas More Affected by COVID-19?
Building upon our earlier Liberty Street Economics post, we continue to analyze the heterogeneity of COVID-19 incidence. We previously found that majority-minority areas, low-income areas, and areas with higher population density were more affected by COVID-19. The objective of this post is to understand any differences in COVID-19 incidence by areas of financial vulnerability. Are areas that are more financially distressed affected by COVID-19 to a greater extent than other areas? If so, this would not only further adversely affect the financial well-being of the individuals in these areas, but also the local economy. This post is the first in a three part-heterogeneity series looking at heterogeneity in the credit market as it pertains to COVID-19 incidence and CARES Act debt relief.
Posted at 7:00 am in Crisis, Demographics, Education, Household Finance, Inequality, Mortgages, Pandemic, Student Loans | Permalink | Comments (0)July 7, 2020Introduction to Heterogeneity Series III: Credit Market Outcomes
Following up series on heterogeneity and inequality broadly and in labor market outcomes specifically, we turn our focus to further documenting heterogeneity in credit market outcomes, looking at disparities in home ownership rates, varying exposure to evictions, differing gains from tuition support and Medicare programs, and more.
Posted at 8:00 am in Demographics, Education, Foreclosure, Household Finance, Housing, Inequality, Mortgages, Student Loans | Permalink | Comments (0)February 26, 2020Did Subprime Borrowers Drive the Housing Boom?
The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.
Posted at 7:00 am in Banks, Central Bank, Credit, Crisis, Economic History, Financial Institutions, Financial Markets, Household, Household Finance, Housing, Mortgages, Recession | Permalink | Comments (8)Economic Research Tracker
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