Brief HAMP Modifications : Is Reset Risk an Issue?
Laurie Goodman, Jun Zhu
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Goodman and Zhu analyze whether HAMP resets are an issue and conclude reset fears are overblown. They find that the first of the resets which will occur in the fourth quarter of 2014 are likely manageable. They expect the first substantial defaults to be in 2016 and likely to accelerate in 2017. This will be short-lived, as the number of resets and hence defaults will shrink considerably in 2018 and plunge in 2019. Goodman and Zhu estimate an increase of 10% increase in the default rate, with 40-50% of affected borrowers receiving an additional modification, suggesting a 5-6% increase in defaults at the resets.
Research Areas Housing finance
Policy Centers Housing Finance Policy Center