Collateral damage: How refinancing constraints exacerbate regional recessions

 

Collateral damage: How refinancing constraints exacerbate regional recessions

Abstract

Falling property values make it impossible for may homeowners to refinance their mortgages when interest rates. fall We confirm that this form of collateral constraint has greatly reduced recent refinancing in states with depressed property markets. Minor institutional changes could have neutralized the damaging effects of the collateral constraints. The FHA since adopted our proposal by allowing streamlined refinancing. Most other lenders have not.

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