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The Mortgage Market as a Stimulus Channel in the COVID-19 Crisis

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  • Edward Golding
  • Laurie S. Goodman
  • Richard Green
  • Susan Wachter

Abstract

The COVID-19 pandemic mortgage forbearance programs are valuable, providing relief to approximately 2 million homeowners. At the same time, aggressive Federal Reserve intervention has decreased mortgage rates substantially, encouraging refinancing. However, mortgage rates remain elevated, as the industry is capacity constrained, and mortgage underwriting has become more restrictive, limiting the potential gains to borrowers from the Fed’s actions. This article proposes a streamlined refinance program for Federal mortgages. We estimate the impact of this program, showing that it would reduce mortgage defaults by allowing approximately 3 million families to refinance, who would otherwise be unable to do so because of tight underwriting requirements. It would also provide a further stimulus of $53 billion per year to the economy.

Suggested Citation

  • Edward Golding & Laurie S. Goodman & Richard Green & Susan Wachter, 2021. "The Mortgage Market as a Stimulus Channel in the COVID-19 Crisis," Housing Policy Debate, Taylor & Francis Journals, vol. 31(1), pages 66-80, January.
    • Handle: RePEc:taf:houspd:v:31:y:2021:i:1:p:66-80
    DOI: 10.1080/10511482.2020.1850015
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    Cited by:

    1. Stephen Malpezzi, 2023. "Housing affordability and responses during times of stress: A preliminary look during the COVID‐19 pandemic," Contemporary Economic Policy, Western Economic Association International, vol. 41(1), pages 9-40, January.

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