The effect of changing mortgage payments on default and prepayment: Evidence from HAMP resets
研究美国住房可负担性调整计划中利率重置对借款人违约和提前还款的因果影响，发现利率每上升1个百分点，违约风险增加约20%，且对低余额贷款影响较小。
Abstract After 5 years of subsidy, interest rates for mortgages modified under the Home Affordable Modification Program (HAMP) reset, increasing annually in increments of up to 1 percentage point until they reach a predetermined rate. We identify the causal effect of increasing interest rates on default, delinquency, and prepayment using an event study design and confirm the effects using a regression kink design. New delinquency and default spike at time of reset among those whose rates increase, with smaller persistent effects continuing. These delinquency and default effects are smaller for lower balance loans in the second reset, for which additional subsidies at the time of second reset are relatively more valuable. We find that a 1 percentage point increase in the mortgage rate led to a roughly 20% increase in the default hazard. This implies that the reset rate increase is cost‐effective for lenders given the default environment at the time of reset: increased revenue from higher rates exceeds estimated losses from additional defaults.