Collateral Damage: How Refinancing Constraints Exacerbate Regional Recessions / Andrew Caplin, Charles Freeman, Joseph Tracy.

Format:

Book

Author/Creator:

Caplin, Andrew.

Contributor:

National Bureau of Economic Research.

Freeman, Charles.

Tracy, Joseph.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4531.

NBER working paper series no. w4531

Language:

English

Subjects (All):

Recessions.

Mortgage loans--Refinancing.

Mortgage loans.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Collateral Damage

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1993.

Cambridge, Massachusetts : National Bureau of Economic Research, 1993.

Summary:

In the current structure of the U.S. residential mortgage market, a fall in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of falling interest rates. In this paper, we explain the institutional background for this effect and quantify its importance. We confirm that this form of collateral constraint has greatly reduced recent refinancing in states with depressed property markets. We also point to the many ways in which the reduction in refinancing may have inflicted additional damage in these already recession-hit states. Finally, we show that relatively minor institutional changes could have neutralized the damaging effects of the collateral constraints, and we discuss why the institutions have their current structure.

Notes:

Print version record

November 1993.