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Macroeconomic effects of the mortgage refinance and the home equity lines of credit

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  • Kim, Jiseob

Abstract

I examine how the mortgage refinance and the home equity lines of credit (HELOC) impact the increase in pre-crisis mortgage debt and post-crisis mortgage defaults. Financially constrained homeowners can cash out funds through refinancing mortgages or extract home equity through HELOC. My quantitative exercise shows that prevalent usage of refinancing increases pre-crisis mortgage debt, which amplifies the post-crisis foreclosure rate. HELOC also contributes to an increase in mortgage defaults, though it negligibly impacts pre-crisis mortgage debt.

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  • Kim, Jiseob, 2020. "Macroeconomic effects of the mortgage refinance and the home equity lines of credit," Journal of Economic Dynamics and Control, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:dyncon:v:121:y:2020:i:c:s0165188920301895
    DOI: 10.1016/j.jedc.2020.104021
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    More about this item

    Keywords

    Mortgage; Refinancing; HELOC; Foreclosure;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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