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

Jiseob Kim

doi:10.1016/j.jedc.2020.104021

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

Jiseob Kim

Department of Economics

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

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.

Original language	English
Article number	104021
Journal	Journal of Economic Dynamics and Control
Volume	121
DOIs	https://doi.org/10.1016/j.jedc.2020.104021
Publication status	Published - 2020 Dec

Bibliographical note

Funding Information:
I thank the editor B. Ravikumar, two anonymous referees, and seminar participants at Bank of Korea, Yonsei University, Jinan University, KAIST College of Business, Korea Institute for Defence Analyses, and the Korea Money and Finance Association Symposium for helpful comments. This research was supported by the Yonsei University Research Fund of 2019-22-0072.

Publisher Copyright:
© 2020 Elsevier B.V.

All Science Journal Classification (ASJC) codes

Economics and Econometrics
Control and Optimization
Applied Mathematics

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10.1016/j.jedc.2020.104021

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title = "Macroeconomic effects of the mortgage refinance and the home equity lines of credit",

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.",

author = "Jiseob Kim",

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AB - 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.

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

Abstract

Bibliographical note

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