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

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Abstract

The COVID-19 pandemic was characterized by both high refinancing volumes and high rates of mortgage nonpayment. Refinancing activity differed significantly across racial and ethnic groups, and we show that the benefits from the lower interest rate environment were not shared equally. Compared to white borrowers, Black and Hispanic mortgage borrowers experienced higher rates of nonpayment, which reflected both a greater transition into nonpayment status for Black and Hispanic borrowers and a lower likelihood of resuming payments. However, strong house price appreciation in recent years, particularly in 2020, means that foreclosure risk is lower for past-due borrowers as compared to the 2007–10 period. In addition, borrowers in nonpayment have significantly higher credit scores now than in the 2007–10 period, in part thanks to the widespread availability of forbearance for federally backed mortgages.

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  • Kristopher Gerardi & Lauren Lambie-Hanson & Paul S. Willen, 2021. "Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2021(6), pages 1-40, June.
    • Handle: RePEc:fip:a00068:99135
    DOI: 10.29338/ph2021-06
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    1. Andreas Fuster & Aurel Hizmo & Lauren Lambie-Hanson & James Vickery & Paul S. Willen, 2021. "How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic," NBER Working Papers 28843, National Bureau of Economic Research, Inc.
    2. Lisa J. Dettling & Lauren Lambie-Hanson, 2021. "Why is the Default Rate So Low? How Economic Conditions and Public Policies Have Shaped Mortgage and Auto Delinquencies During the COVID-19 Pandemic," FEDS Notes 2021-03-04-2, Board of Governors of the Federal Reserve System (U.S.).
    3. Lauren Lambie-Hanson & Carolina Reid, 2018. "Stuck in Subprime? Examining the Barriers to Refinancing Mortgage Debt," Housing Policy Debate, Taylor & Francis Journals, vol. 28(5), pages 770-796, September.
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    Cited by:

    1. de la Campa, Elijah A. & Reina, Vincent J., 2023. "Landlords’ rental businesses before and after the COVID-19 pandemic: Evidence from a National Cross-Site Survey," Journal of Housing Economics, Elsevier, vol. 59(PB).

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    More about this item

    Keywords

    mortgage refinancing; mortgage repayment; home equity; racial inequality;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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