Bootstrap Slider

Research Seminars & Workshops @ IRES

Professor Amit Seru
University of Chicago

Joint Seminar - Mortgage Refinancing, Consumer Spending, and Competition: Evidence from the Home Affordable Refinancing Program


7 December 2015 (Monday)


3.00pm - 4.30pm


BIZ1 3-1 (Excellance-3a)


We examine the ability of the government to impact mortgage refinancing activity and spur consumption by focusing on the Home Affordable Refinancing Program (HARP). The policy allowed intermediaries to refinance insufficiently collateralized mortgages by extending government credit guarantee on such loans. We use proprietary loan-level panel data from a large market participant with refinancing history and social security number matched consumer credit records of each borrower. A difference-in-difference empirical design based on eligibility requirements of the program reveals a substantial increase in refinancing activity by the program: more than three million eligible borrowers with primarily fixed-rate mortgages – the predominant contract type in the U.S. -- refinanced their loans under HARP. Borrowers received a reduction of around 140 basis points in interest rate, on average, due to HARP refinancing, amounting to about $3,500 in annual savings per borrower. There was a significant increase in the durable spending by borrowers after refinancing, with larger increase among more indebted borrowers. Regions more exposed to the program saw a relative increase in non-durable and durable consumer spending, a decline in foreclosure rates, and faster recovery in house prices. A variety of identification strategies reveal that competitive frictions in the refinancing market may have partly hampered the program’s impact. On average, these frictions reduced take-up rate among eligible borrowers by 10%-20% and cut interest rate savings by 16-33 basis points, with larger effects among the most indebted borrowers who were the key target of the program. These findings have implications for future policy interventions, pass through of monetary policy through household balance sheets, and design of the mortgage market.

About the Speaker

Amit Seru's primary research interest is in corporate finance. He is interested in issues related to financial intermediation and regulation, interaction of internal organization of firms with financing and investment, and incentive provision in firms. His papers in these areas have been published in the Quarterly Journal of Economics, the Journal of Finance, the Journal of Financial Economics, the Journal of Monetary Economics and the Review of Financial Studies. His research on the behavior of banks and regulators during the housing crisis won the 2013 AQR Insight distinguished paper award and has been featured in major media, including the Wall Street Journal, the New York Times, the Financial Times and the Economist.

Seru earned a bachelor's degree in electronics and communication in 1996 and an MBA in finance in 1998 from the University of Delhi. Subsequently, he received a PhD in finance from the University of Michigan in 2007 before joining the University of Chicago. He was a senior consultant at Accenture before pursuing his Ph.D. Seru was the recipient of a Rackham Pre-Doctoral Fellowship, Dykstra Fellowship, Mistui Emerging Market Fellowship, Rodkey Fellowship, and received a Lt. Governor's gold medal for academic excellence.


For information about all our upcoming seminars, please visit Department of Finance Website. For enquires on finance seminars, please contact Ms Fang.

Bookmark and Share top