Policy Intervention in Debt Renegotiation: Evidence from the Home Affordable Modification Program

Policy Intervention in Debt Renegotiation: Evidence from the Home Affordable Modification Program

By
Sumit Agarwal, gene Amromin, Itzhak Ben-David, Souphala Chomsisengphat, Tomasz Piskorski, Amit Seru
Journal of Political Economy. June
2017, Vol. 125, Issue 3, Pages 654-712

We evaluate the effects of the 2009 Home Affordable Modification Program (HAMP) that provided intermediaries with sizable financial incentives to renegotiate mortgages. HAMP increased intensity of renegotiations and prevented a substantial number of foreclosures but reached just one-third of its targeted indebted households. This shortfall was in large part due to low renegotiation intensity of a few large intermediaries and was driven by intermediary-specific factors. Exploiting regional variation in the intensity of program implementation by intermediaries suggests that the program was associated with a lower rate of foreclosures, consumer debt delinquencies, house price declines, and an increase in durable spending.