WASHINGTON (Reuters) – The United States could face financial stress even as the pandemic eases if homeowners and businesses fall behind on mortgages and business leases while the economy recovers, Kansas City Federal Reserve President Esther George said on Tuesday.
George’s remarks to a real estate group injected a note of caution to the generally optimistic view that her colleagues and private forecasters have of the coming year, when the rollout of vaccinations is expected to ease the nation’s health crisis and allow a fuller economic reopening.
The risk, she said, is that mortgages that have been put into forbearance during the pandemic will fall officially into arrears, while businesses that may have paid their rent using the proceeds of government loans will now have to fend for themselves.
On top of that, the reshuffling of the population and jobs away from city centers may change rents and prices, a potential shock to both borrowers and lenders in the real estate market.
“While the strains on real estate finance currently appear contained, this relative health has been importantly supported by the extraordinary policy response to the pandemic,” George said in remarks to the forum, organized by the University of Missouri-Kansas City. “If support fades ahead of a sustained…