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

Kadiri Karamon (), Douglas McManus () and Jun Zhu ()
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Kadiri Karamon: Freddie Mac
Douglas McManus: Freddie Mac
Jun Zhu: Urban Institute

The Journal of Real Estate Finance and Economics, 2017, vol. 55, issue 4, No 4, 457-475

Abstract: 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 decreases the expected monthly default rate by about 48–62 percent using different bandwidth specifications.

Keywords: HARP; Refinance; Mortgage default; Fuzzy RDD (search for similar items in EconPapers)
JEL-codes: E65 G21 G28 R28 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11146-016-9566-z

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The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

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