Widespread vaccinations and relaxed CDC restrictions have stimulated a robust economic rebound. Since the start of the pandemic, the U.S. unemployment rate declined dramatically from a peak of 14.8% to roughly 5.8% at the time of this writing. Employers have added roughly 14.7 million jobs. Still, 9.3 million workers remain suspended in a state of joblessness and financial fragility, including low-to moderate-income-class families worried about preserving their homes.

For homeowners facing COVID-related hardships, the CARES Act’s mortgage forbearance protection has been a crucial lifeline: an unprecedented payment deferral program allowing struggling borrowers to delay or reduce their mortgage payments, creating an essential safe harbor that temporarily secured their claim to the American Dream. According to the Federal Reserve Bank of New York, forbearance plans disproportionately benefitted low-income borrowers, especially those holding FHA-insured loans or living in disadvantaged neighborhoods.

Despite evidence that many low-income borrowers remain in distress, this crucial policy shield will disappear on June 30 when the federal forbearance program is set to expire. This development has serious implications for the roughly 2.1 million borrowers still under the protective ambit of COVID forbearance programs. On the surface, steady increases in forbearance exits suggest that borrowers’ financial circumstances have improved. These national trends, however, mask significant financial weaknesses plaguing financially stressed households, and financial stress tends to be geographically and demographically concentrated among communities of color. The looming forbearance cliff threatens to expose millions of unemployed and underemployed homeowners to foreclosure, bankruptcy, or pressure to sell prematurely. These escape routes will undoubtedly exacerbate the racial wealth gap; each option represents a retreat from homeownership that communities of color are ill-prepared to absorb. Homeownership is integral to generational wealth creation, home equity is the largest component of asset-driven wealth for Black and Hispanic accounting for nearly 40% of their balance sheet on average

Read the full article about homeownership by Makada Henry-Nickie, Tim Lucas, Radha Seshagiri, and Samantha Elizondo at Brookings.