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Staff Working Papers
Working Paper 24-11: Individual Borrower Motivations Surrounding Mortgage Forbearance Take-Up and Exit

Published: 12/23/2024

Author: Justin C. Contat, William M. Doerner, Michael J. Seiler and Scott Weiner

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.

Attachment:

Working Paper 24-11