Refinance and Mortgage Default: An Empirical Analysis of the HARP's Impact on Default Rates

36 Pages Posted: 3 Dec 2012 Last revised: 13 Dec 2012

Jun Zhu

Federal Home Loan Mortgage Corporation (FHLMC)

Date Written: December 1, 2012

Abstract

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.

Keywords: HARP, Refinance, Mortgage Default, Selection Model

JEL Classification: E65, G21, G28, R28

Suggested Citation

Zhu, Jun, Refinance and Mortgage Default: An Empirical Analysis of the HARP's Impact on Default Rates (December 1, 2012). Available at SSRN: https://ssrn.com/abstract=2184514 or http://dx.doi.org/10.2139/ssrn.2184514

Jun Zhu (Contact Author)

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

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