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Effects of household creditworthiness on mortgage refinancings

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Author Info
S. Peristiani
P. Bennett
G. Monsen
R. Peach
J. Raiff

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Abstract

Using a unique loan level data set that links individual household credit ratings with property and loan characteristics, we test the extent to which homeowners' equity and credit ratings affect the likelihood that mortgage loans will be refinanced as interest rates fall. The logit model estimates strongly support the importance of both the equity and credit ratings affect the likelihood that mortgage loans will be refinanced as interest rates fall. The logit model estimates strongly support the importance of both the equity and credit variable. These results are interesting both from the viewpoint of investors in mortgage products (since prepayments are directly affected) and from the perspective of monetary policy (since refinancings are one channel by which lower interest rates normally help reliquify households).

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Publisher Info
Paper provided by Federal Reserve Bank of New York in its series Research Paper with number 9622.

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Date of creation: 1996
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Handle: RePEc:fip:fednrp:9622

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Related research
Keywords: Consumer credit ; Mortgages;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Andrew Caplin & Charles Freeman & Joseph Tracy, 1993. "Collateral Damage: How Refinancing Constraints Exacerbate Regional Recessions," NBER Working Papers 4531, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Ben S. Bernanke, 1993. "Credit in the macroeconomy," Quarterly Review, Federal Reserve Bank of New York, issue Spr, pages 50-70.
  3. Wayne Archer & David C. Ling & Gary A. McGill, 1995. "The Effect of Income and Collateral Constraints on Residential Mortgage Terminations," NBER Working Papers 5180, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Goodman, John Jr. & Ittner, John B., 1992. "The accuracy of home owners' estimates of house value," Journal of Housing Economics, Elsevier, vol. 2(4), pages 339-357, December. [Downloadable!] (restricted)
  5. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Cunningham, Donald F & Capone, Charles A, Jr, 1990. " The Relative Termination Experience of Adjustable to Fixed-Rate Mortgages," Journal of Finance, American Finance Association, vol. 45(5), pages 1687-1703, December. [Downloadable!] (restricted)
  7. Lynn Paquette, 1986. "Estimating household debt service payments," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 12-23.
  8. Follain, James R & Scott, Louis O & Yang, T L Tyler, 1992. "Microfoundations of a Mortgage Prepayment Function," The Journal of Real Estate Finance and Economics, Springer, vol. 5(2), pages 197-217, June.
  9. DiPasquale, Denise & Somerville, C. Tsuriel, 1995. "Do House Price Indices Based on Transacting Units Represent the Entire Stock? Evidence from the American Housing Survey," Journal of Housing Economics, Elsevier, vol. 4(3), pages 195-229, September. [Downloadable!] (restricted)
  10. Robert B. Avery & Raphael W. Bostic & Paul S. Calem & Glenn B. Canner, 1996. "Credit risk, credit scoring, and the performance of home mortgages," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 621-648.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael LaCour-Little & Gregory H. Chun, 1999. "Third Party Originators and Mortgage Prepayment Risk: An Agency Problem?," Journal of Real Estate Research, American Real Estate Society, vol. 17(1), pages 55-70. [Downloadable!]
  2. Paul Bennett & Richard Peach & Stavros Peristiani, 1997. "Structural change in the mortgage market and the propensity to refinance," Research Paper 9736, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  3. Michael LaCour-Little & Michael Marschoun & Clark L. Maxam, 2002. "Improving Parametric Mortgage Prepayment Models with Non-parametric Kernel Regression," Journal of Real Estate Research, American Real Estate Society, vol. 24(3), pages 299-328. [Downloadable!]
  4. Gary Engelhardt, 2001. "Nominal Loss Aversion, Housing Equity Constraints, and Household Mobility: Evidence from the United States," Center for Policy Research Working Papers 42, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
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