Refinance and Mortgage Default: A Regression Discontinuity Analysis of HARP's Impact on Default Rates
Posted: 13 Jun 2016
Date Written: June 9, 2016
This paper examines the impact of refinancing on mortgage defaults based on an empirical investigation of the Home Affordable Refinance Program (HARP). We study a unique dataset from Freddie Mac which includes loans funded right before and after the HARP eligibility cutoff date, an exogenous event. Using a Fuzzy Regression Discontinuity Design method, we show that receiving a HARP refinance materially decreases the expected monthly default rate by about 48-62 percent using different bandwidth specifications.
Keywords: HARP, Refinance, Mortgage Default, Fuzzy RDD
JEL Classification: E65, G21, G28, R28
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