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Loan Delinquency Projections for COVID-19

Author

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  • Grey Gordon
  • John Bailey Jones

Abstract

The authors forecast the effects of the COVID-19 pandemic on loan delinquency rates under three scenarios for unemployment and house price movements. In the baseline scenario, their model predicts that loan delinquency rises from 2.3 percent in 2019 to a peak of 3.9 percent in 2025 with a total of $580 billion in write-offs. In 2021, absent policy intervention, the model predicts that delinquency would be 3.1 percent. However, mortgage forbearance, student loan forbearance, and fiscal transfers keep delinquency from increasing in 2021. The greatest reductions in delinquency are achieved through mortgage forbearance and student loan forbearance, with fiscal transfers playing a smaller role. In the authors' adverse (favorable) scenario, loan delinquency peaks at 8.1 percent (2.8 percent) and write-offs total $1.1 trillion ($420 billion).

Suggested Citation

  • Grey Gordon & John Bailey Jones, 2020. "Loan Delinquency Projections for COVID-19," Working Paper 20-02, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:88375
    DOI: 10.21144/wp20-02
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    Cited by:

    1. Özlem Dursun-de Neef, H. & Schandlbauer, Alexander, 2021. "COVID-19 and lending responses of European banks," Journal of Banking & Finance, Elsevier, vol. 133(C).
    2. Nigmonov, Asror & Shams, Syed & Alam, Khorshed, 2024. "Liquidity risk in FinTech lending: Early impact of the COVID-19 pandemic on the P2P lending market," Emerging Markets Review, Elsevier, vol. 58(C).
    3. Asror Nigmonov & Syed Shams, 2021. "COVID-19 pandemic risk and probability of loan default: evidence from marketplace lending market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-28, December.

    More about this item

    Keywords

    COVID-19; loan delinquency; Survey of Consumer Finances;
    All these keywords.

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