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This article evaluates how the most important policy responses to the COVID-19 pandemic affected the US mortgage market. In particular, we consider the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020; the follow-on American Rescue Plan (ARP) Act of 2021, which extended many of the provisions in the CARES Act; and the Federal Reserve's large-scale asset purchase (LSAP) program that was announced in March 2020. Our analysis considers both the aggregate effects and the distributional effects of these policies on mortgage borrowers. Overall, we find that pandemic-era forbearance worked very well in reducing foreclosures and mortgage delinquencies for all borrowers, better than the mortgage modification programs of the Great Recession, both because there were fewer restrictions and because the economic environment was so different. In contrast, while many borrowers benefited from the huge decline in mortgage rates caused, in part, by the LSAP program, Black and Hispanic borrowers were far less likely to benefit than White borrowers due to significantly slower refinancing speeds.

Key findings:

  1. Forbearance, expanded unemployment insurance (UI) benefits, and economic impact payments (EIPs) were quite effective in alleviating financial distress for mortgage borrowers at the outset of the pandemic and in preventing longer-run problems in mortgage and housing markets.
  2. Minority mortgage borrowers were much more likely to experience distress and miss mortgage payments during the pandemic period, which was likely due, in part, to higher rates of job loss. However, we show that minority borrowers who missed mortgage payments were just as likely to use forbearance as White borrowers who missed mortgage payments.
  3. Low long-term interest rates, due in part to the Federal Reserve's large-scale asset purchases, spurred a refinancing wave. While borrowers who were enrolled in forbearance were unable to refinance, a large fraction of borrowers who remained current on their loans during the height of the pandemic took advantage of the refinancing opportunity and significantly lowered their payments.
  4. Unlike forbearance, however, there were large differences in refinancing behavior across racial and ethnic groups. Through March 2021, only 10.6 percent of Black borrowers refinanced as compared with 15 percent of Hispanic borrowers, almost 19 percent of White borrowers, and 22 percent of Asian borrowers. After controlling for basic underwriting variables including credit score, loan-to-value ratio, income at origination, loan amount, as well as the potential amount of refinance savings, Black borrowers were 67 percent as likely as White borrowers to refinance.

Center Affiliation: Center for Financial Innovation and Stability

JEL classification: G21, G51, E52, J15

Key words: mortgage refinancing, mortgage repayment, home equity, racial inequality


The Federal Reserve Bank of Atlanta's Policy Hub leverages the expertise of Atlanta Fed economists and researchers to address issues of broad policy interest. Our research centers coordinate this work and seek to influence policy discussions. Areas of interest include: forecasting, fiscal policy, and macroeconomics (Center for Quantitative Economic Research); financial stability, innovation, and regulation (Center for Financial Innovation and Stability); human capital, labor markets, health, and education (Center for Human Capital Studies); and government-sponsored entity reform, mortgage markets, and affordable housing (Center for Housing and Policy). Sign up for email updates. Under "Publications" select "Policy Hub."