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Collateral Damage: Refinancing Constraints and Regional Recessions
Andrew Caplin Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER) Charles Freeman Leonard N. Stern School of Business - Department of Economics Joseph S. Tracy Federal Reserve Bank of New York; National Bureau of Economic Research (NBER) Journal of Money, Credit and Banking, Vol. 29, No. 4, Part 1, November 1997 Abstract: In the current structure of the U.S. residential mortgage market, a decrease in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of declining interest rates. In this paper, we show that this form of collateral constraint has greatly reduced refinancing in states with depressed property markets. We outline the interaction between regional recessions and refinancing constraints.
JEL Classifications: E52, E58 Accepted Paper SeriesDate posted: July 18, 1997 ; Last revised: October 30, 1997Suggested CitationContact Information
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