Getting Mortgage Payments on Track Proves Harder for Black Homeowners
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Here's your Money Briefing for Tuesday, May 4th. I'm J.R. Whelan for The Wall Street Journal. Last year, millions of Americans took advantage of a federal program that let them put their monthly mortgage payments on pause. Since then, many people have gotten back on solid financial footing and exited the program. But that progress isn't being made by everyone equally. Black homeowners in particular are falling behind.
With the rate of black homeowners in forbearance, those who have agreed with their mortgage companies to postpone payments is double the rate of homeowners overall and double the rate of white homeowners.
So why the difference? Coming up, our consumer finance reporter, Orla McCaffrey, will tell us what's slowing black homeowners' path to recovery and why economists are concerned about the effect it could have on the broader economy. That's after the break.
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What is the scope of the mortgage forbearance program and who used it?
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New federal data shows a disproportionate number of black homeowners remain in mortgage forbearance. Our consumer finance and banking reporter, Orla McCaffrey, has been looking into this, and she's here to discuss. Orla, thanks for being here. Sure. So the federal mortgage forbearance program was put into place about 14 months ago. How well has it done helping homeowners around the country?
You know, it's been pretty effective for homeowners, allowing them to get back on their feet. About half of people in forbearance last June, when the highest number of people were in forbearance, have now exited. So they're current on their mortgages again.
But Federal Reserve data says that Black homeowners are still falling behind on their mortgages compared to other groups. What do the numbers say about that?
The rate of black homeowners in forbearance, those who have agreed with their mortgage companies to postpone payments, is double the rate of homeowners overall and double the rate of white homeowners. The data also shows that black homeowners are exiting the relief programs more slowly. About 35% of black homeowners who were in forbearance last June have exited, so they're now current on their payments. That's compared with a 43% rate of improvement for all homeowners.
So what's happening here? Why are Black homeowners falling behind on their mortgages more than other groups?
Black households typically are less insulated from financial blows like the economic fallout of the coronavirus pandemic. They have less liquid savings, less wealth on hand. So there's less of a cushion there to cover an expense or expenses like multiple months of mortgage payments. Black workers are also more more likely to be unemployed. The unemployment rate for them is higher than their counterparts. And they're also more likely to be employed in industries that were hard hit by the pandemic, like the service and hospitality sectors.
Now, you've spoken to several black homeowners about this. What do they tell you?
So one of the homeowners I spoke to had fallen behind in his mortgage payments a couple of months before the pandemic after a job loss.
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