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Keywords:mortgages 

Discussion Paper
Did Import Competition Boost Household Debt Demand?

In the years preceding the Great Recession, the United States experienced a dramatic rise in household debt and an unprecedented increase in import competition. In a recent staff report, we outline a link between these two seemingly unrelated phenomena. We argue that the displacement of workers exposed to import competition fueled their demand for mortgage credit, which left many households more vulnerable to the eventual downturn in the housing market.
Liberty Street Economics , Paper 20180117

Discussion Paper
Just Released: Great Recession’s Impact Lingers in Hardest-Hit Regions

The New York Fed?s Center for Microeconomic Data today released our Quarterly Report on Household Debt and Credit for the fourth quarter of 2017. Along with this report, we have posted an update of state-level data on balances and delinquencies for 2017. Overall aggregate debt balances increased again, with growth in all types of balances except for home equity lines of credit. In our post on the first quarter of 2017 we reported that overall balances had surpassed their peak set in the third quarter of 2008?the result of a slow but steady climb from several years of sharp deleveraging during ...
Liberty Street Economics , Paper 20180213

Discussion Paper
A Better Measure of First-Time Homebuyers

Much of the concern about affordable homeownership has focused on first-time buyers. These buyers, who are often making the transition from renting to owning, can find it difficult to save to meet down-payment requirements; this is particularly true in those areas where rent takes up a significant portion of a household's monthly income. In contrast to first-time buyers, repeat buyers can typically rely on the equity in their current house to help fund the down payment on a trade-up purchase; they also have an easier time qualifying for a new mortgage if they've successfully made payments on ...
Liberty Street Economics , Paper 20190408

Report
How do mortgage refinances affect debt, default, and spending? Evidence from HARP

We use quasi-random access to the Home Affordable Refinance Program (HARP) to identify the causal effect of refinancing a mortgage on borrower balance sheet outcomes. We find that on average, refinancing into a lower-rate mortgage reduced borrowers' default rates on mortgages and nonmortgage debts by about 40 percent and 25 percent, respectively. Refinancing also caused borrowers to expand their use of debt instruments, such as auto loans, home equity lines of credit (HELOCs), and other consumer debts that are proxies for spending. All told, refinancing led to a net increase in debt equal to ...
Staff Reports , Paper 841

Report
Household leveraging and deleveraging

U.S. households' debt skyrocketed between 2000 and 2007, but has since been falling. This leveraging and deleveraging cycle cannot be accounted for by the liberalization and subsequent tightening of mortgage credit standards that occurred during the period. We base this conclusion on a quantitative dynamic general equilibrium model calibrated using macroeconomic aggregates and microeconomic data from the Survey of Consumer Finances. From the perspective of the model, the credit cycle is more likely due to factors that impacted house prices more directly, thus affecting the availability of ...
Staff Reports , Paper 602

Report
Import competition and household debt

We analyze the effect of import competition on household balance sheets from 2000 to 2007 using individual data on consumer finances. We exploit variation in exposure to foreign competition using industry-level shipping costs and initial differences in regions? industry specialization. We show that household debt increased significantly in regions where manufacturing industries are more exposed to import competition. A one standard deviation increase in exposure to import competition explains 30 percent of the cross-regional variation in household leverage growth, and is mostly driven by home ...
Staff Reports , Paper 821

Working Paper
BORROWER CREDIT ACCESS AND CREDIT PERFORMANCE AFTER LOAN MODIFICATIONS

While the preventive effect of loan modifications on mortgage default has been well-documented, evidence on the broad consequences of modifications has been fairly limited. Based on two unique loan-level data sets with borrower credit profiles, this study reports novel empirical evidence on how homeowners manage their credit before and after receiving modifications. The paper has several main findings. First, loan modifications improve borrowers? overall credit standing and access to credit. Modifications that provide principal reduction, rate reduction, or greater payment relief, as well as ...
Working Papers , Paper 16-26

Journal Article
Monetary Incentives and Mortgage Renegotiation Outcomes

This paper studies the effect of monetary incentives on mortgage renegotiation. Lenders are sometimes willing to renegotiate mortgage contracts with homeowners who are at risk of foreclosure. This paper models the renegotiation process as a simple sequential move game in which the homeowner first seeks renegotiation and the lender responds by deciding whether or not to modify the terms of the mortgage. The model is used to examine outcomes in the presence of monetary incentives given to the homeowner and lender like those given by U.S. government programs during the recent foreclosure crisis. ...
Economic Quarterly , Issue 2Q , Pages 147-168

Working Paper
REGIME SHIFT AND THE POST-CRISIS WORLD OF MORTGAGE LOSS SEVERITIES

The average loss rate for conventional mortgages rose from less than 10% pre-crisis to more than 30% during the crisis, reaching and sustaining greater than 40% post-crisis. Using a novel database that contains the components of mortgage losses, we identify a regime shift in loss severities caused by various government interventions and changes in business practices in the servicing industry. This regime shift helps explain the persistently high loss severities post-crisis, even after a strong recovery in the housing market. Our findings have implications for loss modeling, pricing, and, ...
Working Papers , Paper 17-8

Working Paper
Household Credit and Local Economic Uncertainty

This paper investigates the impact of uncertainty on consumer credit outcomes. We develop a local measure of economic uncertainty capturing county-level labor market shocks. We then exploit microeconomic data on mortgages and credit-card balances together with the crosssectional variation provided by our uncertainty measure to show strong borrower-specific heterogeneity in response to changes in uncertainty. Among high risk borrowers or areas with more high risk borrowers, increased uncertainty is associated with housing market illiquidity and a reduction in leverage. For low risk borrowers, ...
Working Papers , Paper 17-21

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