Mortgage refinancing in 2001 and early 2002

By Glenn B. Canner, Karen E. Dynan, Wayne Passmore. 2002

145 citations recorded by the source corpus.

Over the past ten years, millions of homeowners have taken advantage of lower mortgage interest rates and higher home values and have refinanced their mortgage loans. For many, the decision to refinance was motivated by a desire to reduce their monthly mortgage payments, either by obtaining a lower interest rate or by extending the maturity of their mortgage. When they have refinanced, many homeowners have liquefied some of the equity they accumulated in their homes by borrowing more than they needed to pay off their former mortgage and cover the transaction costs of the refinancing. They have used the funds raised in so-called cash-out refinancings to make home improvements, to repay other debts, or to purchase goods and services or other assets. This article presents estimates, based on recent survey findings, of the incidence of refinancing, the changes in terms and conditions of mortgages after refinancing, the amount of funds homeowners raised in the process, and the ways in which homeowners used the funds. It also provides comparisons with previous surveys of refinancing activity and a statistical analysis of the relative importance of different determinants of refinancing and the amount of home equity liquefied during refinancing. Finally, it gives rough estimates of the effects of recent refinancing on the U.S. economy, including the effects on aggregate consumption spending.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/dbac8359122a307e19074dd2bad175b07c85f399

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Citations in the corpus

Housing Wealth and Consumption Growth: Evidence from a Large Panel of Households (2010, background): “Since much of refinancing is 6 The Surveys of Consumers from January through June 2002 described in Canner, Dynan, and Passmore (2002) also suggest that rate refinancing is the dominating type in the U.S.: about 44.8% of refinancers cashed out. rate refinancing, it depends the initial loan term and…”
Housing wealth, financial wealth, and consumption: New evidence from micro data (2009, background): “In a study of mortgage re-finance activity, Canner et al. [2002] apply Survey of Consumer Finance data to estimate the magnitudes of housing wealth extraction and related consumption effects during 2001-2002.”
Household Debt and the Macroeconomy (2004, background): “11 Using a slightly different concept of equity withdrawal, Canner et al (2002) estimated that, in 2001 and 2002, around one quarter of funds extracted from the value of the US housing stock through mortgage refinancing was used to repay other debts (although this happened in over half of the…”
Macroeconomic Implications of Rising Household Debt (2004, background): “In the process of refinancing, many households have taken the opportunity to withdraw equity from their houses to smooth consumption (Canner et al (2002)).”
Housing markets and the financial crisis of 2007-2009: lessons for the future (2010, background): “Canner, Dynan, and Passmore (2002) document how proceeds from cash-out mortgage refinancings partially boosted US consumer spending, consistent with the cross-section consumption findings of Hurst and Stafford (2004) and evidence that mortgage refinancing costs have fallen (Bennett, Peach, and…”
Rising household debt: Its causes and macroeconomic implications--a long-period analysis (2008, background): “1 See, for example, Canner et al. (2002), Greenspan and Kennedy (2005) and Chomsisengphet and Pennington-Cross (2006).”