The loan payment relief required by the federal CARES Act in response to household income disruption 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 — home mortgages and student loans — were able to skip payments without penalties or damage to their credit ratings, WSJ reported. In contrast, borrowers with automobile loans or credit card debt were more likely to be penalized financially for late payments and endure damage to their credit scores.
The reason for the difference is that the federal government has more influence in mortgage and student loan markets, WSJ reported. The government was able to manage that lenders holding federally-backed debt extend certain grace to borrowers.
Credit card and auto debt, however, tend to be outside the easy reach of federal rule-makers, according to the report.
An effect of the difference is that borrowers who have college educations and own their homes tended to fare better, WSJ reported, noting that expanded unemployment benefits tended to benefit low-income workers more than higher-income workers.
WSJ cited Federal Reserve data indicating that the average home-owning household has net worth of $255,000, while the average renting family has net worth of $6,300. Additional Federal Reserve data cited by WSJ held that in low-income areas, 72 percent of borrowers held neither student loan nor mortgage debt.
In separate news, WSJ cited data from TransUnion, the credit bureau, putting the number of consumer loans in forbearance in May at 100 million. In June, 7.3 million automobile loans were in some sort of deferral status.
In November, the Federal Reserve Bank of New York reported that U.S. households paid down $10 billion of credit card debt during the quarter that ended Sept. 30, and $76 billion during the quarter that ended July 31.
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