Collateral Damage: Refinancing Constraints and Regional Recessions

In the current structure of the U.S. residential mortgage market, a decrease in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of declining interest rates. In this paper, we show that this form of collateral constraint has greatly reduced refinancing in states with depressed property markets. We outline the interaction between regional recessions and refinancing constraints.

  • Date: September 1997
  • Research Area(s):
  • Publication Type: Articles
  • Publication: Journal of Money, Credit and Banking, 29(4), pp. 496-516