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Evaluating the Effects of the Home Affordable Modification Program

Cóndor Richard

No 2021-08, Working Papers from Banco de México

Abstract: The Home Affordable Modification Program (HAMP) was a loan modification program introduced in 2009, in the U.S., to assist highly indebted homeowners with avoiding foreclosure. This program also encouraged private lenders to offer more sustainable modifications. This paper studies the role of HAMP in preventing higher foreclosures rates during and after the Great Recession, in the context of a general-equilibrium heterogeneous-agents model with two types of households (Borrowers and Savers), uninsurable idiosyncratic risk, and both private and HAMP modifications. The main result is that, without HAMP, the peak in the foreclosure rate could have been 50% larger (3.2 percent vs 2.2 percent in data).

Keywords: Housing policy; Heterogeneous agents; Financial Economics (search for similar items in EconPapers)
JEL-codes: C61 E44 G51 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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