Crowding Out Effects of Refinancing on New Purchase Mortgages

Steven Sharpe and Shane M. Sherlund ()
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Shane M. Sherlund: Board of Governors of the Federal Reserve System

Review of Industrial Organization, 2016, vol. 48, issue 2, No 5, 209-239

Abstract: Abstract We present evidence that binding mortgage processing capacity constraints reduce mortgage originations to borrowers with low-to-modest credit scores. Mortgage processing capacity constraints typically bind when the demand for mortgage refinancing rises far above average levels, such as when mortgage interest rates drop to record low levels. As a result, high capacity utilization leads mortgage lenders to ration mortgage credit by focusing on mortgage applications that require less underwriting resources. This is hypothesized to have a particularly adverse impact on relatively higher credit-risk borrowers’ ability to obtain mortgages, particularly for purchasing borrowers with low-to-modest credit scores.

Keywords: Capacity constraint; Mortgages; Refinancing (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (21)

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Journal Article: Crowding Out Effects of Refinancing on New Purchase Mortgages (2016)
Working Paper: Crowding Out Effects of Refinancing on New Purchase Mortgages (2015)
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DOI: 10.1007/s11151-016-9500-9

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