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

Jiseob Kim

Journal of Economic Dynamics and Control, 2020, vol. 121, issue C

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.

Keywords: Mortgage; Refinancing; HELOC; Foreclosure (search for similar items in EconPapers)
JEL-codes: E21 E44 G01 G21 R21 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:121:y:2020:i:c:s0165188920301895

DOI: 10.1016/j.jedc.2020.104021

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