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

Posted: 27 Nov 2017 Last revised: 18 Mar 2018

See all articles by Kadiri Karamon

Kadiri Karamon

Federal Home Loan Mortgage Corporation (FHLMC)

Douglas A. McManus

Federal Home Loan Mortgage Corporation (FHLMC)

Jun Zhu

The Urban Institute

Multiple version iconThere are 2 versions of this paper

Date Written: November 20, 2017

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 (November 20, 2017). Journal of Real Estate Finance and Economics, Vol. 55, No. 4, 2017, Available at SSRN: https://ssrn.com/abstract=3074635

Kadiri Karamon

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

Douglas A. McManus

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States
703-903-2953 (Phone)

Jun Zhu (Contact Author)

The Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

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