The Effect of Mortgage Forbearance on Refinancing: Evidence from the CARES Act

52 Pages Posted: 4 Jun 2020 Last revised: 18 Mar 2021

See all articles by Agostino Capponi

Agostino Capponi

Columbia University

Ruizhe Jia

Columbia University

David Aaron Rios

Columbia University

Date Written: March 12, 2021

Abstract

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

Capponi, Agostino and JIA, RUIZHE and Rios, David Aaron, The Effect of Mortgage Forbearance on Refinancing: Evidence from the CARES Act (March 12, 2021). Available at SSRN: https://ssrn.com/abstract=3618776 or http://dx.doi.org/10.2139/ssrn.3618776

Agostino Capponi (Contact Author)

Columbia University ( email )

S. W. Mudd Building
New York, NY 10027
United States

RUIZHE JIA

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

David Aaron Rios

Columbia University ( email )

1255 Amsterdam Avenue
New York, NY 10027
United States

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