Posts Tagged "stimulus check"
February 4, 2021
CARES Act’s Loan Forbearance is Working
As the pandemic was sinking into our collective consciousness a year ago, Congress, fearing economic calamity, allowed Americans to temporarily halt their mortgage and student loan payments.
By the end of October – seven months after President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act – Americans had postponed some $43 billion in debt, including car loans and credit cards, which many lenders deferred voluntarily. Billions more are still being added to the total amount in forbearance.
Fast action in Congress “resulted in substantial financial relief for households,” says a new study by researchers at some of the nation’s top business schools. Their recent analysis found that the assistance went where it was needed – to “financially vulnerable borrowers living in regions that experienced the highest COVID-19 infection rates and the greatest deterioration in their economic conditions.”
When lenders grant forbearance they agree to waive their customers’ debt payments for a specified period of time. For example, Congress said borrowers could request that their payments on federally backed mortgages be deferred by six months to a year.
Although forbearance was less visible than the checks taxpayers also received under the CARES Act, the financial lift was equally potent. Customers who received loan forbearance saved an average of $3,200 just on their mortgages last year – this compares with $3,400 in stimulus checks for a family of four.
Congress also automatically suspended all payments on federal student loans, saving borrowers an average $140 last year, and President Biden has just extended the forbearance until at least Oct. 1. Lenders, in an attempt to prevent massive loan defaults on their books, voluntarily gave consumers a break last year on two types of loans that weren’t part of the CARES Act: automobile loans ($430 saved) and credit cards ($70 saved).
Forbearance is only temporary relief, because the missed payments will eventually have to be made up. But in a telling indication that borrowers didn’t want to fall behind, just a third of the people who asked for debt relief actually used it. In these cases, forbearance “acts as a credit line” borrowers can draw on – if they really need it. …Learn More
August 18, 2020
Recession’s Hit to Cities Varies Widely
The COVID-19 recession is unlike anything this country has seen.
If the second-quarter contraction were to continue at the same pace for a full year, the economy would shrink by a third! This is the deepest downturn since the Great Depression, and low-income Americans are feeling the brunt of it.
What makes this recession unique, however, is that the low-income people living in the most affluent metropolitan areas are worse off than low-income residents of less affluent cities, Harvard economist Raj Chetty explained during a recent interview on Boston’s public radio station, WBUR.
“What’s going on is that affluent folks have the capacity to self-isolate, to work remotely, to not go on vacation,” he said. “So in affluent areas, you see enormous drops in consumer spending and business revenue.” In these areas, more than half of the lowest-income workers have lost their jobs, and many of them worked in small businesses, he said.
In less affluent cities, people have to go to work and “are out and about more, and business revenue hasn’t fallen nearly as much,” he told his radio host. “In previous recessions, we haven’t seen those sort of patterns.”
Chetty’s point is demonstrated by comparing what happened to consumer spending this year in San Francisco and Fresno, California, on the tracktherecovery.org website he and other economists have created. (Visitors can sort the spending data by state, industry, and consumer income levels, as well as by city.) …Learn More