Altogether, American households and firms will owe around $125bn on April 1st. How much might go unpaid?
TO MOST WORKING Americans, the first of the month brings both joy and sorrow. It is payday, but also when rent and mortgage payments—their biggest bills—are due. Businesses must pay out wages and rent from the revenues they have accrued over the past month. This April 1st is likely to be even crueller than usual. The spread of covid-19, and the government’s efforts to contain the virus, have forced many retailers to close shop and led to millions of workers losing their jobs.
Altogether, households and firms owe around $125bn. How much might go unpaid? It seems likely that the 3.3m workers who signed up for unemployment benefits in the week ending March 21st will have also sought some relief from their landlords or their banks. Economists at the University of Chicago reckon that as many as two-thirds of America’s 159m workers cannot work entirely from home. Many may lose some pay as a result.
Homeowners struggling to pay mortgages will probably find that help is at hand. The vast majority of residential mortgages are held, or backed, by government-sponsored entities , like Fannie Mae and Freddie Mac . The government has ordered Fannie and Freddie to grant forbearance to homeowners, and has imposed a 60-day moratorium on foreclosures. The Federal Reserve has said it will buy unlimited quantities of mortgage-backed securities issued by GSEs.
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