TY - JOUR T1 - COVID-19 Mortgage Forbearances: Drivers and Payment Behavior JF - The Journal of Structured Finance DO - 10.3905/jsf.2021.1.120 SP - jsf.2021.1.120 AU - Douglas McManus AU - Elias Yannopoulos Y1 - 2021/03/11 UR - https://pm-research.com/content/early/2021/03/11/jsf.2021.1.120.abstract N2 - This article examines mortgage forbearance in Freddie Mac loans during the COVID-19 crisis and compares this period to two previous episodes: a baseline and a natural disasters sample. We find that the rates of mortgage forbearance in the COVID-19 period are similar to those in the natural disaster sample but are much higher than in the baseline sample. In all three periods, we find higher forbearance rates are associated with lower FICO scores, higher DTI ratios, and higher LTV ratios. In addition, higher levels of the cumulative cases of COVID-19 are associated with higher forbearance rates. We also examine the payment behavior of borrowers who entered forbearance during the COVID-19 crisis. We show that most mortgages in forbearance missed at least one payment within the first three months or were delinquent when entering forbearance. However, by the seventh month after entry into forbearance, about half of the mortgages are current, whereas about 40.7% are at least 90 days delinquent.TOPICS: MBS and residential mortgage loans, financial crises and financial market history, legal/regulatory/public policyKey Findings▪ Mortgage forbearance rates in the COVID-19 crisis are similar to historic rates in natural disaster areas but are much higher than in the months just prior to the crisis.▪ Higher forbearance rates are associated with lower FICO scores, higher DTI ratios, higher LTV ratios, higher cumulative COVID-19 rates, larger mortgage payments, two- to four-unit and investor properties, single borrowers, and refinances.▪ By the seventh month in forbearance, about half of the loans have transitioned to current status, but a similar share of loans remains delinquent. ER -