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Refinance and Mortgage Default: A Regression Discontinuity Analysis of HARP's Impact on Default Rates

Journal of Real Estate Finance and Economics, Forthcoming

Posted: 13 Jun 2016

See all articles by Kadiri Karamon

Kadiri Karamon

Federal Home Loan Mortgage Corporation (FHLMC)

Douglas A. McManus

Retired

Jun Zhu

Urban Institute

Multiple version iconThere are 2 versions of this paper

Date Written: June 9, 2016

Abstract

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

Suggested Citation

Karamon, Kadiri and McManus, Douglas A. and Zhu, Jun, Refinance and Mortgage Default: A Regression Discontinuity Analysis of HARP's Impact on Default Rates (June 9, 2016). Journal of Real Estate Finance and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2793661

Kadiri Karamon

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

Douglas A. McManus

Retired ( email )

Jun Zhu (Contact Author)

Urban Institute ( email )

2100 M Street N.W.
Washington, DC 20037
United States

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