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Policy Intervention in Debt Renegotiation: Evidence from the Home Affordable Modification Program

63 Pages Posted: 29 Aug 2012 Last revised: 21 Jul 2016

Sumit Agarwal

Georgetown University - Department of Finance

Gene Amromin

Federal Reserve Bank of Chicago

Itzhak Ben-David

Ohio State University - Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Tomasz Piskorski

Columbia Business School - Finance and Economics

Amit Seru

Stanford University

Multiple version iconThere are 3 versions of this paper

Date Written: February 15, 2016

Abstract

We evaluate the effects of the 2009 Home Affordable Modification Program (HAMP) that provided intermediaries with sizeable financial incentives to renegotiate mortgages. HAMP increased intensity of renegotiations and prevented substantial number of foreclosures but reached just one-third of its targeted indebted households. This shortfall was in large part due to low renegotiation intensity of a few large intermediaries and was driven by intermediary-specific factors. Exploiting regional variation in the intensity of program implementation by intermediaries suggests that the program was associated with lower rate of foreclosures, consumer debt delinquencies, house price declines, and an increase in durable spending.

Keywords: Government intervention, Debt renegotiation, Mortgage modification, Foreclosures, Housing crisis, HAMP, Servicers

JEL Classification: E60, E65, G18, G21, H3

Suggested Citation

Agarwal, Sumit and Amromin, Gene and Ben-David, Itzhak and Chomsisengphet, Souphala and Piskorski, Tomasz and Seru, Amit, Policy Intervention in Debt Renegotiation: Evidence from the Home Affordable Modification Program (February 15, 2016). Journal of Political Economy, Forthcoming; Fisher College of Business Working Paper No. 2012-03-020; Charles A. Dice Center Working Paper No. 2012-20. Available at SSRN: https://ssrn.com/abstract=2138314 or http://dx.doi.org/10.2139/ssrn.2138314

Sumit Agarwal

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-8207 (Phone)

HOME PAGE: http://www.ushakrisna.com

Gene Amromin

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
230 S. LaSalle
Chicago, IL 60604
United States
3123225368 (Phone)
3123226011 (Fax)

Itzhak Ben-David

Ohio State University - Fisher College of Business, Finance Department ( email )

2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)

Tomasz Piskorski

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Amit Seru (Contact Author)

Stanford University ( email )

650 Knight Management
Stanford, CA 94305
United States

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