by: José Mustre-del-Río, Juan M. Sanchez and Kartik Athreya
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RWP 26-13, September 2026; updated September 28, 2026

Relative to the persistent delinquency typically observed in consumer credit, mort-gage forbearance during the COVID-19 pandemic was surprisingly short-lived. To understand why, we develop a rich structural model and estimate it on credit panel microdata. Next, using the model and survey data, we identify key roles for both se-lection into mortgages by relatively patient households and the failure of anticipated income losses to materialize. Even taking selection in account, had losses occurred, forbearance participation would have been persistent. Thus, the power of forbear-ance, a frequent macroeconomic policy, hinges on borrower selection, shock realiza-tions, and revisions to expectations following those realizations.

JEL classifications: D14, D84, E21, G51.

Article Citation

  • Mustre-del-Río, José, Juan M. Sánchez, and Kartik Athreya. 2026. “Fleeting Forbearance in a World of Persistent Financial Distress.” Federal Reserve Bank of Kansas City, Research Working Paper no. 26-13, September 2026. Available at External Linkhttps://doi.org/10.18651/RWP2026-13

Related Research

  • Athreya, Kartik, José Mustre-del Río, and Juan M. Sánchez. 2019. “The Persistence of Financial Distress.” Review of Financial Studies, vol. 32, no. 10, pp. 3851–3883. Available at External Linkhttps://doi.org/10.1093/rfs/hhz009

  • Kaplan, Greg, Kurt Mitman, and Giovanni L. Violante. 2020. “The Housing Boom and Bust: Model Meets Evidence.” Journal of Political Economy, vol. 128, no. 9, pp. 3286–3345. Available at External Linkhttps://doi.org/10.1086/708816

  • Mustre-del Río, José, Juan M. Sánchez, Ryan Mather, and Kartik Athreya. 2025. “The Effects of Macroeconomic Shocks: Household Financial Distress Matters.” Review of Financial Studies, vol. 38, no. 2, pp. 564–604. Available at External Linkhttps://doi.org/10.1093/rfs/hhae058

The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

Author

José Mustre-del-Río

Research and Policy Officer

José Mustre-del-Río is a Research and Policy Officer at the Federal Reserve Bank of Kansas City. He joined the Economic Research Department in August 2011. Prior to joining the …

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