Do Large-Scale Refinancing Programs Reduce Mortgage Defaults? Evidence From a Regression Discontinuity Design: Working Paper 2015-06

Gabriel Ehrlich and Jeffrey Perry

No 50871, Working Papers from Congressional Budget Office

Abstract: In 2012, the Federal Housing Administration (FHA) reduced fees to refinance FHA-insured mortgages obtained before---but not after---a retroactive deadline. We use a natural experiment to study how reduced mortgage payments affect default rates. Using a regression discontinuity design, we find that reducing payment size by 1 percent lowers conditional default rates by 2.75 percent. Evidence suggests that those effects are larger for borrowers with negative equity and lower credit scores. We estimate that the policy will prevent more than 35,000 defaults of FHA-insured

JEL-codes: E65 G18 G21 H50 (search for similar items in EconPapers)
Date: 2015-10-08
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:cbo:wpaper:50871

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