The Effect of Mortgage Forbearance on Refinancing: Evidence from the CARES Act
52 Pages Posted: 4 Jun 2020 Last revised: 18 Mar 2021
Date Written: March 12, 2021
This paper examines the effect of foreclosure prevention policies on refinancing. Through a counterfactual analysis, we show that a foreclosure moratorium decreases significantly the refinancing cost of households and relaxes their refinancing eligibility constraints. Our results imply that granting forbearance to households facing foreclosures has positive externalities on a broader range of households who intend to refinance. Mortgage forbearance thus amplifies the stimulative effect of monetary policies.
Keywords: CARES Act, Foreclosure, Refinancing, Mortgage Forbearance, GSE, Monetary Policy
JEL Classification: G0, G1, G2, G15, C52, I10
Suggested Citation: Suggested Citation