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Working Paper
The Effects of Macroeconomic Shocks: Household Financial Distress Matters
When a macroeconomic shock arrives, variation in household balance-sheet health (captured by the presence of financial distress “FD”), leads to differential access to credit, and hence a distribution of consumption responses. As we document, though, over the past two recessions, households in prior FD also experienced macroeconomic shocks more intensely than others, leading to a distribution of shock severity. Quantifying the importance of each dimension of heterogeneity (FD or shock severity) for consumption requires a structural model. We find that heterogeneity in FD matters more than ...
Report
Payment size, negative equity, and mortgage default
Surprisingly little is known about the importance of mortgage payment size for default, as efforts to measure the treatment effect of rate increases or loan modifications are confounded by borrower selection. We study a sample of hybrid adjustable-rate mortgages that have experienced substantial rate reductions over the past years and are largely immune to these selection concerns. We find that payment size has an economically large effect on repayment behavior; for instance, cutting the required payment in half reduces the delinquency hazard by about 55 percent. Importantly, the link between ...
Discussion Paper
A Look at Bank Loan Performance
U.S. banks experienced a rapid rise in loan delinquencies and defaults during the 2007-09 recession, driven by rising unemployment and falling real estate prices, among other factors. More than four years on from the official end of the recession, how do things look now?
Discussion Paper
Debt Relief and the CARES Act: Which Borrowers Face the Most Financial Strain?
In yesterday's post, we studied the expected debt relief from the CARES Act on mortgagors and student debt borrowers. We now turn our attention to the 63 percent of American borrowers who do not have a mortgage or student loan. These borrowers will not directly benefit from the loan forbearance provisions of the CARES Act, although they may be able to receive some types of leniency that many lenders have voluntarily provided. We ask who these borrowers are, by age, geography, race and income, and how does their financial health compare with other borrowers.
Discussion Paper
Just Released: Hints of Increased Hardship in America’s Oil-Producing Counties
Today, the New York Fed released the Quarterly Report on Household Debt and Credit for the first quarter of 2016. Overall debt saw one of its larger increases since deleveraging ended, while delinquency rates for the United States continued to improve and remain at very low levels. Although the overall picture of Americans? liabilities has continued to improve since the financial crisis, we wondered what the variation looks like at local levels. One advantage of our Consumer Credit Panel (CCP), which is based on Equifax credit data, is that we can examine geographic variation in debt and ...
Journal Article
Understanding the Evolution of Student Loan Balances and Repayment Behavior: Do Institution Type and Degree Matter?
Student loan balances and delinquency rates have soared to unprecedented levels in recent years, forming what many commentators have termed a “student loan bubble” and creating a major public policy issue. Given the importance of student loans for human capital formation and economic growth, understanding student loans and repayment behavior is essential from a policy perspective. Yet research in this area has been limited. The authors seek to fill the gap by examining student loan performance over time by institution type and degree program. Using detailed data collected as part of ...
Speech
Opening remarks at the Convening on Student Loan Data Conference
Remarks at the Convening on Student Loan Data Conference, Federal Reserve Bank of New York, New York City.
Identifying the Most Financially Vulnerable Families
Households with less than two months’ income in liquid assets and those with high debt-to-income ratios face the greatest risk of serious delinquency.
Discussion Paper
Are Financially Distressed Areas More Affected by COVID-19?
Building upon our earlier Liberty Street Economics post, we continue to analyze the heterogeneity of COVID-19 incidence. We previously found that majority-minority areas, low-income areas, and areas with higher population density were more affected by COVID-19. The objective of this post is to understand any differences in COVID-19 incidence by areas of financial vulnerability. Are areas that are more financially distressed affected by COVID-19 to a greater extent than other areas? If so, this would not only further adversely affect the financial well-being of the individuals in these areas, ...
Discussion Paper
What Might Happen When Student Loan Forbearance Ends?
Federal student loan relief was recently extended through August 31, 2022, marking the sixth extension during the pandemic. Such debt relief includes the suspension of student loan payments, a waiver of interest, and the stopping of collections activity on defaulted loans. The suspension of student loan payments was expected to help 41 million borrowers save an estimated $5 billion per month. This post is the first in a two-part series exploring the implications and distributional consequences of policies that aim to address the student debt burden. Here, we focus on the uneven consequences ...