Journal article
STEERING LOAN MODIFICATIONS POSTPANDEMIC
Law and contemporary problems, Vol.85(2), p.201
04/01/2022
Abstract
For a brief moment in early 2020, as policymakers and the public became more aware of the severity of the COVID-19 pandemic, it seemed like Congress might provide Americans with true relief during an unprecedented time. Although Congress passed three relief bills during the pandemic, the majority of relief delivered to households came in the form of debt forbearance. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which took effect at the end of March 2020,1 included three key moratoria—a foreclosure moratorium for homeowners, an eviction moratorium for renters, and a student loan payment moratorium—all of which were continued through mid to late 2021. Soon after the CARES Act was passed, we published a series of papers critiquing the relief provided to American households.3 As we detailed in The Folly of Credit As Pandemic Relief, these three moratoria amounted to extensions of credit.4 People were temporarily relieved of their obligations to pay their mortgages and student loans, and their landlords could not evict them if they did not pay their rent. But eventually, extensions of credit still require payment. Although they gave people breathing room, upon the moratoria’s expirations, people will again face these debt obligations. Indeed, when the foreclosure moratorium ended in July 2021, foreclosure activity increased.5 This Article focuses on the likely fallout for American households as a result of expiring moratoria and provides a regulatory path for steering creditors to offer borrowers workable loan modifications or else to bring people to the point of reckoning with their debts in bankruptcy. For each forborne debt, borrowers will have to make up the missed payments in some way. Depending on the deals that borrowers entered with their creditors during the moratorium period, assuming they entered into a deal at all, loan terms may extend by the number of missed payments or regular payments may increase to spread the missed payments over the remaining life of the loan. Regardless of the details of each deal, in the near future, people will have to face the large debt obligations that come with mortgages, auto loans, and credit cards. Similarly, people who did not need forbearance of certain debts during the pandemic may find themselves unable to keep up with their debts and in danger of defaulting.
Details
- Title: Subtitle
- STEERING LOAN MODIFICATIONS POSTPANDEMIC
- Creators
- Pamela FooheyDalié JiménezChristopher K Odinet
- Resource Type
- Journal article
- Publication Details
- Law and contemporary problems, Vol.85(2), p.201
- Publisher
- Duke University School of Law
- ISSN
- 0023-9186
- eISSN
- 1945-2322
- Language
- English
- Date published
- 04/01/2022
- Academic Unit
- Finance; Law Faculty; Public Policy Center (Archive)
- Record Identifier
- 9984283721702771
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