Delegated Relief: What Servicers Say, and What Statutory Eligibility Is Worth in Mortgage Forbearance

When a family falls behind on their mortgage, the path to relief is rarely automatic. It usually involves a conversation with a mortgage servicer, the company that manages the loan on behalf of the bank or investor. This intermediary holds the power to decide who gets a break on payments and who does not. For decades, these decisions were made case by case, often requiring borrowers to prove they were truly in trouble with stacks of paperwork. But in 2020, the United States government stepped in with a new law called the CARES Act. This law drew a sharp line in the sand: if a home loan was backed by the federal government, the borrower could get a temporary pause on payments just by saying they were struggling. No proof was needed. If the loan was not backed by the government, the servicer could still choose to help, but they were free to demand proof, deny the request, or offer a different solution. This created a natural experiment where two groups of struggling borrowers sat side by side, one with a guaranteed right to relief and the other waiting for permission.

A researcher at New York University, Arka Prava Bandyopadhyay, wanted to see what happened in the space between those two groups. He had access to a unique set of records from a single large mortgage servicer: the actual transcripts of thousands of phone calls made between January and May 2020. These were not just notes on whether a loan was paid or not; they were the words spoken by the people on the other end of the line. By using computer tools to read these thousands of conversations, the researcher could see exactly what was said, who started the conversation, and whether the borrower was asked to provide documents. The goal was to understand how the servicer used its power. Did they treat the two groups differently? Did the requirement for paperwork stop people from getting help? And perhaps most importantly, did the system treat Black and White borrowers differently when the rules changed?

The study found that the difference between the two groups was not about who got a "yes" or a "no" from a person, but about whether a conversation even happened. For borrowers with government-backed loans, the process was simple. If they called in and said they were having trouble, the servicer granted the pause on payments. The law required it, and the paperwork was waived. For the other group, the private loans, the process was different. The servicer did not simply say "no" to everyone. Instead, the conversations often turned into a request for documents. If a borrower called in, the servicer would ask for proof of unemployment or income loss before granting relief. If the borrower could not provide that proof, or if they did not call at all, they did not get the pause. The data showed that the requirement for documentation acted like a uniform barrier. It did not sort people by race; it simply stopped everyone who was subject to it from getting relief as easily as the government-backed group did.

The numbers tell a clear story about the cost of that barrier. Across the months studied, the government-backed borrowers were about 3.6 percentage points more likely to get a forbearance plan than the private borrowers. This gap existed even when looking at borrowers who were doing the same thing, such as calling the servicer themselves. The study suggests that the requirement to prove hardship cost the private borrowers a significant amount of relief. In a time of crisis, this meant that roughly one in every twenty-eight private borrowers who might have qualified for help did not get it simply because their loan type required a different process. This was not a small difference; it represented a substantial drop in the rate at which people were able to access the safety net.

When the researcher looked at whether this system treated Black and White borrowers differently, the answer was surprisingly quiet. The data did not show a pattern where Black borrowers were denied help more often than White borrowers within the private loan group. The gap in relief between the government and private groups was the same for both races. The study was able to rule out large differences in treatment; it found no evidence of the kind of double-digit disparities often seen in other parts of the mortgage market. While the study could not rule out very small, subtle differences, it found that the main problem was not unfair treatment by the people on the phone. The problem was the rule itself. The documentation requirement was a wall that stood in front of everyone in the private loan group, regardless of their race, and it was high enough to keep many of them out.

The way the conversations played out in the transcripts revealed how the servicer's discretion worked. For the private loans, the calls were often about verification. The servicer would ask for documents, discuss ineligibility, or refer the borrower to other options like loan modifications. For the government loans, the calls were straightforward requests for the pause. The researcher also noticed that the servicer rarely called borrowers to offer help. Instead, relief mostly followed the borrowers who picked up the phone first. When the servicer did call out, it was often to borrowers who were already in deep trouble, and those calls were more likely to lead to discussions about foreclosure or the foreclosure moratorium rather than the payment pause. This suggests that the system was not designed to reach out and find people who needed help; it was designed to respond to those who asked, and the rules for asking were different depending on the type of loan.

This research matters because the temporary pandemic rules have evolved into permanent systems. The way the government handles mortgage relief today still follows the same basic design: federally backed loans have a clear, documented path to relief, while other loans depend on the discretion of the servicer. The study shows that when a rule requires proof of hardship, it reduces the number of people who get help, and it does so without necessarily discriminating against any specific group. The barrier is uniform. The policy implication is that if the goal is to help more people, the solution may not be to police how servicers treat different racial groups, but to rethink the rules that determine who is eligible in the first place. The study suggests that removing the requirement for documentation could raise the rate of relief significantly, helping the people who are currently left behind by the paperwork, without necessarily changing how the process feels to the borrower on the phone.

The findings are specific to the data available from this one servicer during those ten weeks in 2020. The researcher cannot say for certain that every servicer in the country behaved exactly the same way, but the evidence from this large portfolio is clear. The gap in relief was real, and it was driven by the difference in rules, not by the bias of the people administering them. The study offers a precise measurement of what a documentation requirement costs in terms of people getting help, and it challenges the idea that the main issue in mortgage relief is always about unfair treatment. Sometimes, the issue is simply that the door is locked for everyone on one side of the street, while it is open for everyone on the other.