Refinance and Mortgage Default: An Empirical Analysis of the HARP's Impact on Default Rates
Federal Home Loan Mortgage Corporation (FHLMC)
December 1, 2012
This paper examines the impact of refinance on mortgage default, based on an empirical investigation of Home Affordable Refinance Program. We study a unique dataset which includes both HARP loans and HARP-eligible loans that did not refinance. Using a range of methodologies it is shown that receiving a HARP refinance materially decreases the expected default rate. After controlling for other loan characteristics and borrower selection effects, the paper finds that default rates of HARP loans decrease by about 54% from 3.31% to about 1.52% over an average 15-month performance period.
Number of Pages in PDF File: 36
Keywords: HARP, Refinance, Mortgage Default, Selection Model
JEL Classification: E65, G21, G28, R28
Date posted: December 3, 2012 ; Last revised: December 13, 2012