Knowledge Bank

The COVID-19 pandemic and subsequent job loss exacerbated racial economic inequalities in the US. These economic inequalities threaten to worsen racial inequalities in the housing market. Homeowners suffering a loss of income due to the pandemic may opt into forbearance to halt mandatory mortgage payments, which prevented many foreclosures. Borrowers who remained current throughout the pandemic were able to take advantage of record low market mortgage rates and refinance to a lower mortgage interest rate and lower monthly payments. A challenge when studying racial inequality in housing is the confounding effect of loan characteristics, which are correlated with race. In this study many loan characteristics are held constant because all loans are originated by the Ohio Housing Financing Agency (OHFA). This study I use OHFA data on loan level monthly performance during the COVID-19 pandemic of loans originated since 2015. I run a multinomial logistic panel regression with monthly mortgage outcomes of default, prepaying, forbearance, and staying current as competing risks. Holding constant loan traits by virtue of the sample and controlling for financial and demographic characteristics, I find that Black homeowners in the sample were more likely to opt into forbearance and less likely to refinance than white homeowners during the pandemic. These differences in mortgage outcomes during the pandemic may lead to disproportionate defaults and foreclosures among Black homeowners after forbearance is over.