Effects of household creditworthiness on mortgage refinancings

Paul Bennett, Gordon Monsen, Richard Peach (), Stavros Peristiani () and Jonathan Raiff

No 9622, Research Paper from Federal Reserve Bank of New York

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).

Keywords: Mortgages; Consumer credit (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (5)

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