Search Results
Working Paper
The Age Gap in Mortgage Access
This paper uses data on millions of single-borrower mortgage applications to study the relationship between applicant age and mortgage application outcomes. Conditional on a rich set of applicant, property, and loan characteristics, mortgage refinance applications submitted by older borrowers are associated with higher rejection probabilities. This pattern holds within lender and across loan types. Rejection probability increases smoothly with age and accelerates in old age. The acceleration is slower for female applicants. Inability to maintain properties may contribute as older applicants ...
Working Paper
Do Minorities Pay More for Mortgages?
We test for racial discrimination in the prices charged by mortgage lenders. We construct a unique dataset where we observe all three dimensions of a mortgage's price: the interest rate, discount points, and fees. While we find statistically significant gaps by race and ethnicity in interest rates, these gaps are offset by differences in discount points. We trace out point-rate schedules and show that minorities and whites face identical schedules, but sort to different locations on the schedule. Such sorting may reflect systematic differences in liquidity or preferences. Finally, we find no ...
Discussion Paper
How Severe Was the Credit Cycle in the New York-Northern New Jersey Region?
U.S. households accumulated record-high levels of debt in the 2000s, and then began a process of deleveraging following the Great Recession and financial crisis. In some parts of the country, the rise and fall in household indebtedness was quite a bit sharper than in others. In this post, we highlight some of our research examining the magnitude of the recent credit cycle, and focus on how significant it?s been in New York State and northern New Jersey. Compared with the nation as a whole, we find that the region experienced a relatively mild credit cycle, although pockets of elevated ...
Working Paper
Intermediation Frictions in Debt Relief: Evidence from CARES Act Forbearance
We study the role of mortgage servicers in implementing the CARES Act mortgage forbearance program during the COVID-19 pandemic. Despite universal eligibility,we document that a significant number of federally backed mortgage borrowers be-come delinquent during the pandemic without successfully entering into a forbearance program, and that the relative frequency of these "missing" forbearances varies significantly across mortgage servicers for otherwise identical loans. Forbearance out-comes are systematically related to servicer characteristics including size, liquidity and ...
Working Paper
Financing Affordable and Sustainable Homeownership with Fixed-COFI Mortgages
The 30-year fixed-rate fully amortizing mortgage (or ?traditional fixed-rate mortgage?) was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With this sluggish equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowners might have better uses for this ...
Working Paper
Consumption in the Great Recession: The Financial Distress Channel
During the Great Recession, the collapse of consumption across the US varied greatly but systematically with house-price declines. Our message is that household financial health matters for understanding this relationship. Two facts are essential for our finding: (1) the decline in house prices led to an increase in household financial distress (FD) prior to the decline in income during the recession, and (2) at the zip-code level, the prevalence of FD prior to the recession was positively correlated with house-price declines at the onset of the recession. We measure the power of the ...
Working Paper
Financial Distress and Macroeconomic Risks
This paper investigates how, and how much, household financial distress (FD), arising from allowing debts to go unpaid, matters for the aggregate and cross-sectional consumption responses to macroeconomic risk. Through a battery of structural models, we show that FD can affect consumption responses through three channels: (1) as another margin of adjustment to shocks (direct channel); (2) because its persistence implies a significant degree of preference heterogeneity (indirect channel); and (3) because it can exacerbate macroeconomic risks whenever it is more severe in the hardest-hit ...
Working Paper
Reverse mortgage loans: a quantitative analysis
Supersedes Working Paper 13-27. Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. Despite growth in this market, only 2.1% of eligible homeowners had RMLs in 2011. In this paper, the authors analyze reverse mortgages in a calibrated life-cycle model of retirement. The average welfare gain from RMLs is $885 per homeowner. The authors? model implies that low-income, low-wealth, and poor-health households benefit the most, consistent with empirical evidence. Bequest motives, nursing-home-move risk, house price risk, and loan costs all ...
Ready for the Pandemic? Household Debt before the COVID-19 Shock
Before the pandemic, shares of delinquencies had already been growing in consumer finance loans, credit card debt, student loans and auto loans. And delinquencies can vary greatly among states.
Working Paper
On the Economics of Discrimination in Credit Markets
This paper develops a general equilibrium model of both taste-based and statistical discrimination in credit markets. We find that both types of discrimination have similar predictions for intergroup differences in loan terms. The commonly held view has been that if there exists taste-based discrimination, loans approved to minority borrowers would have higher expected profitability than to majorities with comparable credit background. We show that the validity of this profitability view depends crucially on how expected loan profitability is measured. We also show that there must exist ...