Programs allowing deferrals have mixed results
The relief on loan payments required by the federal CARES law in response to the disruption in household income caused by the pandemic has produced mixed results, the Wall Street Journal (WSJ) reported.
Borrowers who held the type of debt covered by the law – mortgages and student loans – were able to skip payments without penalty or damage to their credit rating, the WSJ reported. In contrast, borrowers with car loans or credit card debt were more likely to be financially penalized for late payments and to suffer damage to their credit scores.
The reason for the difference is that the federal government has more influence in the mortgage and student loan markets, the WSJ reported. The government has been successful in getting lenders with federally guaranteed debt to give borrowers some pardon.
Credit card and auto debt, however, tend to be beyond the reach of federal lawmakers, according to the report.
One effect of the difference is that borrowers who have a college education and own their homes tend to fare better, the WSJ reported, noting that the increase in unemployment benefits tended to benefit more to the unemployed. low-income workers than higher-income workers.
The WSJ cited data from the Federal Reserve indicating that the average homeowner household has a net worth of $ 255,000, while the average renter family has a net worth of $ 6,300. Additional Federal Reserve data cited by the WSJ showed that in low-income areas, 72% of borrowers had neither student loans nor mortgage debt.
In separate news, WSJ cited data from TransUnion, the credit bureau, putting the number of consumer loans on hold in May at 100 million. As of June, 7.3 million auto loans were sort of on hold.
In November, the Federal Reserve Bank of New York reported that U.S. households repaid $ 10 billion in credit card debt in the quarter ended September 30 and $ 76 billion in the quarter ended July 31.