Structural change in the mortgage market and the propensity to refinance
By: Paul Bennett, Richard Peach, and Stavros Peristiani.
Contributors: Peach, Richard Wilson, 1951-; Peristiani, Stavros.; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 45; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 45.
Publisher: Federal Reserve Bank of New York
Published: 1998
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Mortgage loans -- United States -- Refinancing -- Econometric models.; Housing -- United States -- Finance -- Econometric models.
Description: "We hypothesize that the intrinsic benefit required to trigger a refinancing has become smaller due to a combination of technological, regulatory, and structural changes that have made mortgage origination more competitive and more efficient.  To test this hypothesis, we estimate an empirical hazard model of loan survival for two subperiods, using a database that allows us to carefully control for homeowners' credit ratings, equity, loan size, and measurable transaction costs.  Our findings strongly confirm that credit ratings and home equity have significant effects on the refinancing probability.  In addition, we provide evidence that homeowners postpone refinancing in the face of increased interest rate volatility, consistent with option value theory.  Finally, our results clearly support the hypothesis that structural change in the mortgage market has increased homeowners' propensity to refinance"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
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