Jim Curran.

in Malvern, Dad. lost his job in March and was allowed to suspend his mortgage payments, freeing up thousands of dollars a month without affecting his credit rating.

Patricia Orndorff

at St. John’s. Louis Park, Minn. also lost his job in March. Her bank allowed her to temporarily suspend her credit card account, which required a minimum monthly payment of about $100, until July. But interest continues to accumulate and the late payments of August, September and October contribute to their balance.

The federal government helped millions of Americans in the first months of the pandemic by allowing them to defer payment of their mortgages and student loans – two markets in which it has enormous power – with little negative impact. But the government’s reach does not extend to credit card loans, car loans or personal loans, and borrowers with these forms of debt end up receiving far fewer benefits.

Share of accounts in financial difficulties for credit products, monthly

Pay attention: The financial difficulties include the postponement, deferment and freezing of payments and outstanding invoices.

Share of accounts in financial difficulties for credit products, monthly

Pay attention: The financial difficulties include the postponement, deferment and freezing of payments and outstanding invoices.

Pausing Loan Payments During Coronavirus Is Producing Uneven Results

Share of accounts in financial difficulties for credit products, monthly

Pay attention: The financial difficulties include the postponement, deferment and freezing of payments and outstanding invoices.

Pausing Loan Payments During Coronavirus Is Producing Uneven Results

Share of accounts in financial difficulties for credit products, monthly

Pay attention: The financial difficulties include the postponement, deferment and freezing of payments and outstanding invoices.

As a result, the cancellation of public debt has greatly helped homeowners and higher education graduates, many of whom have entered the recession in relatively good financial shape. Workers on low incomes, who are more inclined to hire and who do not have a university degree, have benefited less. Other programmes, such as comprehensive unemployment insurance, have been more useful for the working poor.

Deferral programmes of unprecedented magnitude are temporarily keeping the economy afloat. But the differences in the way programmes are implemented reflect the fact that the instruments used to stimulate the economy tend to be blunt and can have unintended effects.

Mortgage and student loan deferral programs were introduced by the Care Act, which passed a $2 trillion stimulus bill in March and was characterized by further government intervention. This has made them lighter, more generous and more flexible. For example, mortgage departments were instructed to allow borrowers to suspend payments for up to one year if their loans are guaranteed by the government, and rules were drawn up to prevent borrowers from having to make all their missed payments at once. The transfer of federal student loans is automatic and interest-free until 31 December. December granted.

Deferral programmes for credit cards, car loans and personal loans, on the other hand, are at the discretion of lenders and are often determined on a case-by-case basis. Many lenders have given their customers a grace period of two to three months before asking them to pay again. Some ask borrowers to pay back missed payments in a lump sum.

This recession is already hitting low-income workers hardest, as barista, waiter and cleaning lady are difficult to fill in in the event of a pandemic.

Pausing Loan Payments During Coronavirus Is Producing Uneven Results

Patricia Orndorf saw her credit score drop when she missed credit card payments this year.

Photo:

Patricia Orndorff

Homeowners who can benefit from mortgage programs generally already have stronger finances. (The median net worth of homeowners in 2019 was $255,000 versus $6,300 for tenants, according to the Federal Reserve). And those with a student loan usually have a higher level of education, which tends to translate into higher returns.

The Federal Reserve Bank of New York has determined that most Americans are not eligible for assistance under the mortgage and student loan programs of the Care Act. About 63% of borrowers do not have student loans or mortgages, according to the New York Fed. Instead, they have debts, such as credit cards and car loans.

According to the New York Fed, about 72% of borrowers in low-income neighborhoods have no mortgage or student debt.

According to the New York Fed, consumers in high-income, mostly white neighborhoods, are more likely to get a mortgage under the Cares Act program. Residents in these areas are more likely to be mortgaged and have higher monthly payments.

If you try to help households by suspending mortgage payments, you will focus disproportionately on high-income white households, he said.

Andrew Howat,

First vice president of the New York Fed.

In May, according to the Credit Union, more than 100 million consumer financings were refinanced by the government or in some other way.

TransUnie.

This number decreases when people voluntarily or involuntarily withdraw from programmes.

According to the banks, most of the credit card customers who made delayed payments resumed their payments when they left the aid programmes. Publisher of the card

Capital One Financial Corp.

и

Discover the financial services

indicated that 12% of card accounts, or about 25% of card account balances, were late in September.

Synchronous financing

indicates that about 34% of the accounts transferred or closed were not paid in September.

Yet there are at least hundreds of thousands of people who can’t make their payments, and the timing couldn’t be worse. Many of them are about to exhaust their unemployment benefits and the number of applications for unemployment benefits has risen sharply in recent weeks as a result of the increase in the number of cases of the coronavirus.

Mr. Curran, a man from Pennsylvania, asked his two mortgage lenders…

Wells Fargo

& Co. and Citadel Credit Union – if he could stop making payments after losing his job as revenue manager of a software start-up. His creditors gave him a three-month stay.

After about six weeks he got a job as a manager in a local logistics company. He quickly resumed making payments, and by September had used his savings to compensate Wells Fargo for missed payments in excess of $7,000.

The Due Diligence Act requires mortgage lenders to declare borrowers current, even if they are on probation, which protects Mr Curran’s loan. This fall, he refinanced at a much lower interest rate, bringing his payments back to $2,200.

Mr Curran, aged 51, plans to use the savings for his pension accounts and university funds for his two secondary school students.

He said it allowed him to refocus and figure out how to get the money flowing without attacking all his savings or his pension plan.

SHARE YOUR IDEAS

If you participated in a delayed payment program during the pandemic, did that help or hurt you? Share your experience. Take part in the discussion below.

Orndorf, a woman from Minnesota, started a new job in February as a accounts receivable accountant for an upholstered furniture wholesaler. She was hoping it would help her get her finances in order. Mrs. Orndorf, 54, had taken care of her mother for years and had about $30,000 in credit card, car and student debts.

Instead, Mrs. Orndorff fell ill – she thought she had the coronavirus – and lost her new job the next month.

Their student loans were postponed even before the pandemic. BMO Harris Bank suspended its car loan in April.

His biggest credit card balance, about $3,500, was with Synchrony. The bank suspended payments until July and then told her she would have to pay about $100 a month. Mrs. Orndorff couldn’t afford it and missed three payments. Their credit rating went from 730 to 620. Your balance has increased to approximately $3,950 due to interest and late payments.

A Sinhroni spokesman said the bank is committed to responding to customer situations in the wake of the pandemic health crisis. The company ended its pandemic program in October, but continues to offer different types of support, she said.

Pausing Loan Payments During Coronavirus Is Producing Uneven Results

Percentage of borrowers without student loan or mortgage debt, by postcode classification.

* Low-income areas are areas where residents earn less than 25% of the median household income; the middle 50% is the middle 50%; the upper 25% is the upper 25%.

†ZIP Codes in which the Hispanics represent at least 50% of the population are classified as Hispanic majority. The same goes for the black and white areas. Mixed neighbourhoods are postcodes where no group represents more than 50% of the residents.

Sources : New York Federal Consumer Credit Commission and Equifax (debt), American Community Survey (race/ethnicity and income) by the Federal Reserve Bank of New York.

Pausing Loan Payments During Coronavirus Is Producing Uneven Results

Percentage of borrowers without student loan or mortgage debt, by postcode classification.

* Low-income areas are areas where residents earn less than 25% of the median household income; the middle 50% is the middle 50%; the upper 25% is the upper 25%.

†ZIP Codes in which the Hispanics represent at least 50% of the population are classified as Hispanic majority. The same goes for the black and white areas. Mixed neighbourhoods are postcodes where no group represents more than 50% of the residents.

Sources : New York Federal Consumer Credit Commission and Equifax (debt), American Community Survey (race/ethnicity and income) by the Federal Reserve Bank of New York.

Pausing Loan Payments During Coronavirus Is Producing Uneven Results

Percentage of borrowers without student loan or mortgage debt, by postcode classification.

* Low-income areas are areas where residents earn less than 25% of the median household income; the middle 50% is the middle 50%; the upper 25% is the upper 25%.

†ZIP Codes in which the Hispanics represent at least 50% of the population are classified as Hispanic majority. The same goes for the black and white areas. Mixed neighbourhoods are postcodes in which no group represents more than 50% of the residents.

Sources : New York Federal Consumer Credit Commission and Equifax (debt), American Community Survey (race/ethnicity and income) by the Federal Reserve Bank of New York.

Pausing Loan Payments During Coronavirus Is Producing Uneven Results

Percentage of borrowers without student loan or mortgage debt, by postcode classification.

* Low-income areas are areas where residents earn less than 25% of the median household income; the middle 50% is the middle 50%; the upper 25% is the upper 25%.

†ZIP Codes in which the Hispanics represent at least 50% of the population are classified as Hispanic majority. The same goes for the black and white areas. Mixed neighbourhoods are postcodes where no group represents more than 50% of the residents.

Sources : New York Federal Consumer Credit Commission and Equifax (debt), American Community Survey (race/ethnicity and income) by the Federal Reserve Bank of New York.

Miss Orndorff is still unemployed. In order to pay her monthly rent of $1,059, Ms. Orndorf’s Roth IRA. She also made and sold masks. Currently, BMO Harris allows her to pay half of her car loan every month.

In October, after months of efforts, Mrs Orndorf received unemployment benefit. She called Synchrony to offer the payment and was told that her card was blocked.

Orndorf agreed to a settlement agreement that would forgive her approximately 40% of her balance if she made three monthly payments of $790. She plans to use the unemployment money to pay for it.

Write to Anne-Marie Andriotis at [email protected] and Orla McCaffrey at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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