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Individual Borrower Motivations Surrounding Mortgage Forbearance Take-up and Exit

Author

Listed:
  • Justin C. Contat

    (Federal Housing Finance Agency)

  • William M. Doerner

    (Federal Housing Finance Agency)

  • Michael J. Seiler

    (Federal Housing Finance Agency)

  • Scott Weiner

    (Federal Housing Finance Agency)

Abstract

Borrower perceptions and beliefs about the future influence mortgage forbearance decisions. Using a proprietary dataset combining administrative mortgage records with borrower surveys, we find subjective expectations regarding forbearance uncertainty and financial knowledge help predict forbearance participation under the CARES Act alongside traditional underwriting variables. While precautionary motives seemingly drive decisions, a closer look reveals the importance of realized work and personal changes. Additionally, actual need and uncertainty about resolution options cause greater difficulty resuming payments when exiting forbearance. These findings highlight the benefits of using contemporaneous, subjective information during crises and emphasize the need for behavioral insights in policy design.

Suggested Citation

  • Justin C. Contat & William M. Doerner & Michael J. Seiler & Scott Weiner, 2024. "Individual Borrower Motivations Surrounding Mortgage Forbearance Take-up and Exit," FHFA Staff Working Papers 24-11, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:24-11
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    References listed on IDEAS

    as
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    2. Kristopher Gerardi & Lauren Lambie-Hanson & Paul S. Willen, 2022. "Lessons Learned from Mortgage Borrower Policies and Outcomes during the COVID-19 Pandemic," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2022(9), July.
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    7. Jackson T. Anderson & David M. Harrison & Kimberly F. Luchtenberg & Michael J. Seiler, 2023. "Legal Versus Psychological Contracts: When Does a Mortgage Default Settlement Contract Become a Contract?," The Journal of Real Estate Finance and Economics, Springer, vol. 67(2), pages 191-217, August.
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    More about this item

    Keywords

    behavioral; consumer finance; forbearance; mortgage; policy;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D10 - Microeconomics - - Household Behavior - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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