Forbear to Forget

A new Federal Reserve Bank of Cleveland study validates forbearance as a mortgage-market buffer, reinforcing the likelihood that policymakers and servicers will turn quickly to it if current mortgage-market conditions turn ugly under the combined stress of higher rates and slow to no growth. If bank regulators also reinstate regulatory forbearance on forborne loans, the regulatory-capital cost of higher-risk loans gets a nice counter-cyclical boost, perhaps encouraging banks to tread softly back into at least some of this sector if parallel calculations under the all-powerful stress capital buffer prove propitious.