Loss Mitigation During the Pandemic Period: Loans Saved and Implications for Access to Credit

This paper examines the association between enhanced loss mitigation measures implemented during the COVID-19 pandemic and foreclosure outcomes. Using comprehensive loan-level data from Fannie Mae, we provide a descriptive analysis of outcomes following improved loss mitigation policies. Our findings reveal a significant association between these policies and a 46% reduction in the transition rate from serious delinquency to foreclosure. We estimate that loss mitigation policies were associated with approximately 108,756 fewer foreclosures. These changes have since been made permanent. Hence, this paper also explores the potential implications for credit box expansion, suggesting that improved loss mitigation tools could facilitate the safer origination of 193,000 to 745,000 additional Fannie Mae loans annually, representing a 14% to 55% expansion. While acknowledging limitations, this analysis highlights the importance of enhanced loss mitigation programs for housing market stability.