Does Temporary Mortgage Assistance for Unemployed Homeowners Reduce Longer Term Mortgage Default? An Analysis of the Hardest Hit Fund Program

53 Pages Posted: 20 Apr 2020 Last revised: 3 Feb 2021

See all articles by Stephanie Moulton

Stephanie Moulton

Ohio State University- John Glenn College of Public Affairs

Yung Chun

Washington University in St. Louis

Stephanie Pierce

Ohio State University - John Glenn College of Public Affairs

Holly Holtzen

affiliation not provided to SSRN

Roberto Quercia

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning

Sarah Riley

University of North Carolina (UNC) at Chapel Hill

Date Written: October 30, 2020

Abstract

Economic crisis like the Great Recession and the COVID pandemic prompt government intervention to stabilize homeowners and housing markets. During the Great Recession, the primary intervention was permanent loan modifications, with mixed evidence of success. The COVID pandemic spurred a more targeted but temporary intervention--mortgage payment relief for unemployed homeowners. Little is known about the long term effectiveness of temporary mortgage assistance on homeowner outcomes. This paper leverages data on the U.S. Department of Treasury’s Hardest Hit Fund (HHF) program to analyze the longer term effects of temporary mortgage payment subsidies on mortgage default. Our primary empirical strategy exploits the fact that some states were not eligible to offer an HHF program and that certain Metropolitan Statistical Areas (MSAs) encompass jurisdictions in both HHF and non-HHF states. In an alternative specification, we model selection into HHF directly, exploiting lender variation in program participation as an instrument. Our results indicate that receipt of HHF leads to a 40 percent reduction in the probability of mortgage default and foreclosure through four years post assistance. We estimate heterogeneous effects for different at risk populations and discuss implications for policy.

Keywords: Foreclosure, Loan Modification, Unemployment

JEL Classification: G18, G21, G28, G40

Suggested Citation

Moulton, Stephanie and Chun, Yung and Pierce, Stephanie and Holtzen, Holly and Quercia, Roberto G. and Riley, Sarah, Does Temporary Mortgage Assistance for Unemployed Homeowners Reduce Longer Term Mortgage Default? An Analysis of the Hardest Hit Fund Program (October 30, 2020). Available at SSRN: https://ssrn.com/abstract=3559794 or http://dx.doi.org/10.2139/ssrn.3559794

Stephanie Moulton (Contact Author)

Ohio State University- John Glenn College of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Yung Chun

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Stephanie Pierce

Ohio State University - John Glenn College of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Holly Holtzen

affiliation not provided to SSRN

Roberto G. Quercia

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning ( email )

New East Building
Chapel Hill, NC 27599-3140
United States
919-962-4766 (Phone)
Not available (Fax)

Sarah Riley

University of North Carolina (UNC) at Chapel Hill ( email )

1700 Martin Luther King Blvd.
Suite 129, Campus Box 3452
Chapel Hill, NC 27599-3452
United States

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