January 29, 2016

Friday Off-Topic (Moderated) Open Thread (012916)

Filed under: Lucid Links — Tom @ 6:00 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.


1 Comment

  1. Interesting article.

    The Role of Intermediary Competition in Government Interventions: The Case of HARP


    Results of reduced competition
    The above analysis suggests that people refinancing under HARP may have been disadvantaged by a lack of competition in the mortgage market. A recent paper by me and several coauthors (Agarwal et al., 2015) provides evidence that the lack of competition resulted in a significant increase in mortgage rates to many who participated in HARP.


    The U.S. Treasury and the FHFA worked with the GSEs to create the HARP program to help distressed borrowers refinance their mortgages at a lower interest rate. However, HARP initially proved much less effective than anticipated in helping these borrowers. Agarwal et al. (2015) and Amromin and Kearns (2014) analyze one hypothesis as to why HARP was ineffective: the differential treatment of R&W (representation and warranty) may have reduced competition between the existing servicer and potential new lenders. We find that borrowers most likely to be adversely affected by R&W concerns were more likely to refinance with their current servicer and thus paid higher rates.

    A crucial implication of these results is the importance of understanding institutional detail when designing and modifying policies. Whether a program will work as intended, be less effective than intended, or possibly have unintended consequences depends on how the details of that policy interact with the incentives of important participants in the relevant market(s).

    Comment by Par for the Course — January 29, 2016 @ 11:37 am

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