CEU Electronic Theses and Dissertations, 2011
| Author | Antal, Melinda Timea |
|---|---|
| Title | U.S. Household Mortgage Terminations Between 2007-2009: Lock-in Effect, Refinancing and Mobility |
| Summary | In this thesis I estimate the impact on refinancing and moving decisions of the so-called lock-in effect caused by the recent declines in home prices. During 2007 and 2009 falling house prices have caused major capital losses to many homeowners, preventing them from refinancing or moving, and “locking” them into their old mortgage contracts. The diminished home equity is thought to be the main reason behind low prepayment and mobility rates, because under current circumstances borrowers could only get new loans that would be insufficient to prepay the existing loans and provide new down payments. Using a two year panel data from the American Housing Survey, I find that the magnitude of this lock-in effect increased significantly compared to the results presented in the literature for previous time periods, diminishing the baseline, two year probability of refinancing by 47.28 percent and the probability of moving by 34.92 percent. I also present significant evidence, that households’ current income problems affect negatively the propensity to refinance, but “force” borrowers to terminate their existing mortgages by either defaulting or moving, hence increasing the average two year mobility rate. The final model is estimated as a multinomial probit model allowing for inter-choice correlation of unobservables. |
| Supervisor | Kezdi, Gabor |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2011/antal_melinda.pdf |
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