IDEAS home Printed from https://ideas.repec.org/p/bca/bocawp/24-11.html
   My bibliography  Save this paper

Unintended Consequences of the Home Affordable Refinance Program

Author

Listed:
  • Phoebe Tian
  • Chen Zheng

Abstract

We study the unintended effects of the Home Affordable Refinance Program (HARP) on mortgage borrowers. Originally designed to help financially distressed borrowers refinance after the 2008–09 global financial crisis, HARP inadvertently amplified the market power of incumbent lenders by introducing a cost differential between incumbents and their competitors. To assess the welfare implications of this cost advantage, we develop and estimate a structural model of dynamic refinancing decisions with lenders’ offers arising from a search and negotiation process. Our findings reveal that although the cost asymmetry was rectified by a 2013 policy, it still resulted in a welfare loss exceeding the impact of search frictions

Suggested Citation

  • Phoebe Tian & Chen Zheng, 2024. "Unintended Consequences of the Home Affordable Refinance Program," Staff Working Papers 24-11, Bank of Canada.
    • Handle: RePEc:bca:bocawp:24-11
    as

    Download full text from publisher

    File URL: https://www.bankofcanada.ca/2024/04/staff-working-paper-2024-11/
    File Function: Abstract
    Download Restriction: no
    File URL: https://www.bankofcanada.ca/wp-content/uploads/2024/04/swp2024-11.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Financial institutions;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:24-11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bocgvca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.