Residential
Payback Predicament COVID, Mortgage Forbearance, and Repayment Affordability
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conomic downturns indicate significant turmoil in the labor market, often resulting in rises in unemployment and accompanying losses in household income. This threatens consumers’ ability to afford even necessary expenditures, including monthly mortgage payments. The COVID-19 recession was no exception. In the initial wake of the pandemic, the national mortgage delinquency rate surged to nearly 10 percent but has since declined considerably, largely due to the federal government’s broad-reaching mortgage forbearance program. An estimated 70 percent of existing homeowners qualify for temporary relief in their mortgage payments. Although mortgage forbearance largely prevents massive mortgage default and foreclosure, a loss in income can significantly affect a borrower’s ability to repay his mortgage.
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Homeowners who qualified for temporary relief from mortgage payments in the wake of the COVID-19 recession will eventually have to repay any missed or reduced payments. Their ability to do so is largely a function of their age and length of time working. By Clare Losey
Maintaining Homeownership During COVID-19 Housing affordability generally falls into two categories: purchase or repayment affordability. Federal housing policy predominately aims to facilitate purchase affordability—a household’s ability to buy a home. Such policy is largely predicated on the perceived financial and social benefits of homeownership (i.e., wealth accumulation and neighborhood stability). Repayment affordability, on the other hand, denotes an existing homeowner’s ability to maintain monthly mortgage payments. As unemployment spikes during economic downturns, spurring potentially substantial declines in household income, federal housing policy largely shifts to facilitating repayment affordability. TG
