37 posts on "Wilbert van der Klaauw"
August 3, 2021
Forbearance Participation Declines as Programs’ End Nears
The Federal Reserve Bank of New York’s Center for Microeconomic Data today released its Quarterly Report on Household Debt and Credit for the second quarter of 2021. It showed that overall household debt increased at a quick clip over the period, with a $322 billion increase in balances, boosted primarily by a 2.8 percent increase in mortgage balances, a 2.2 percent increase in credit card balances, and a 2.4 percent increase in auto balances. Mortgage balances in particular were boosted by a record $1.22 trillion in newly originated loans. Although some borrowers are originating new loans, struggling borrowers remain in forbearance programs, where they are pausing repayment on their debts and creating an additional upward pressure on outstanding mortgage balances.
August 2, 2021
Who Received Forbearance Relief?
Forbearance on debt repayment was a key provision of the CARES Act, legislation intended to combat the widespread economic losses stemming from the COVID-19 pandemic. This pause on required payments for federally guaranteed mortgages and student loans has provided temporary relief to those affected by the COVID-19 pandemic, and servicers of nonfederal loans often provided forbearances or other relief on request as well. Here, using a special survey section fielded with the August 2020 Survey of Consumer Expectations, we aim to understand who benefitted from these provisions. Specifically, were there differences by age, race, income, and educational background? Did individuals who suffered job or income losses benefit differentially? Did renters receive more or less nonhousing debt relief than homeowners? Answers to these questions are not only key for understanding the economic recovery and implications for inequality and equitable growth, they can provide important insight into the expected effects of more recent and potential future legislation.
May 20, 2021
Consumer 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, 2021
What’s Next for Forborne Borrowers?
We’ve spent the first three posts of this series discussing who has entered mortgage forbearance, and how their personal finances have developed during the course of the pandemic. In this fourth and final post, we will use Consumer Credit Panel (CCP) data to examine the profiles of those who remain in forbearance and those who have exited, and how the performance of household credit may evolve as the force of the pandemic begins to ebb and the economy reopens and normalizes.
Small Business Owners Turn to Personal Credit
In our first post in this series we showed that mortgage provisions under the CARES ACT and its subsequent extensions resulted in a rapid take-up of mortgage forbearances, under which borrowers had the option to pause or reduce debt service payments without inducing a delinquency notation on their credit reports. Here we examine the forbearance take-up rate of a group of mortgage borrowers we expect to have been particularly hard hit by the pandemic recession: small business owners. Relatively little is known about how small business owners have fared over the past year in terms of their personal finances. Were they able to continue making mortgage payments on their homes? Did they draw on home equity to help fund their business operations?
Posted at 11:47 am | Permalink
What 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.
May 12, 2021
Credit Card Balance Declines Are Largest Among Older, Wealthier Borrowers
Total household debt rose by $85 billion in the first quarter of 2021, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Since the start of the pandemic, household debt balances have increased in every quarter but one—the second quarter of 2020, when lockdowns were in full effect. The Quarterly Report and this analysis are based on the New York Fed’s Consumer Credit Panel, which is based on Equifax credit data.
October 13, 2020
How Have Households Used Their Stimulus Payments and How Would They Spend the Next?
In this post, we examine how households used economic impact payments, a large component of the CARES Act signed into law on March 27 that directed stimulus payments to many Americans to help offset the economic fallout from the coronavirus pandemic. An important question in evaluating how much this part of the CARES Act stimulated the economy concerns what share of these payments households used for consumption— what economists call the marginal propensity to consume (MPC). There also is interest in learning the extent to which the payments contributed to the sharp increase in the U.S. personal saving rate during the early months of the pandemic. We find in this analysis that as of the end of June 2020, a relatively small share of stimulus payments, 29 percent, was used for consumption, with 36 percent saved and 35 percent used to pay down debt. Reported expected uses for a potential second stimulus payment suggest an even smaller MPC, with households expecting to use more of the funds to pay down their debts. We find similarly small estimated average consumption out of unemployment insurance (UI) payments, but with somewhat larger shares of these funds used to pay down debt.
September 28, 2020
Consumers Expect Modest Increase in Spending Growth and Continued Government Support
Kosar, Pomerantz, and van der Klauuw highlight key findings from the August 2020 SCE Household Spending Survey and the SCE Public Policy Survey.
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