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17 posts on "Mortgages"

September 24, 2012

How Much Can Refinancing Reduce the Risk of Mortgage Defaults?

Joshua Abel, Joseph Tracy, and Joshua Wright

Improving the ability of homeowners to take advantage of prevailing low mortgage rates by refinancing has remained an active topic of discussion. In a speech in January, New York Fed President Bill Dudley advocated for efforts “to see refinancing made more broadly available on a streamlined basis and with moderate fees to all prime conforming borrowers who are current on their payments.” In an earlier post, we argued that such a refinancing program would not represent a zero sum game between borrowers and investors; rather, it would yield net macroeconomic benefits.

Continue reading "How Much Can Refinancing Reduce the Risk of Mortgage Defaults?" »

Posted by Blog Author at 7:00 AM in Housing, Mortgages | Permalink | Comments (2)

August 29, 2012

Just Released: Has Household Deleveraging Continued?

Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

Today’s release of the 2012Q2 Quarterly Report on Household Debt and Credit indicates a continuation of the downward trend in household debt, which followed a long period of substantial increases. As of June 30, 2012, total outstanding household debt was down nearly $1.3 trillion since its peak in the third quarter of 2008. In the Liberty Street Economics blog’s inaugural post, we used the FRBNY Consumer Credit Panel to decompose this change in household indebtedness. Leading up to the crisis, households increased their cash holdings available for consumption by extracting equity from their homes, using home equity lines of credit and cash-out refinances, and by increasing their nonmortgage balances, such as credit card and auto loan balances. When the Great Recession struck, consumers reversed this behavior and began reducing rather than increasing these obligations. We demonstrated that although some of the reduction in household debt was due to charge-offs (the removal of obligations from consumers’ credit reports because of defaults), much of the debt reduction seen at the overall level was attributable to deleveraging: households actively borrowing less and paying down existing liabilities. In this post and accompanying interactive charts, we update our analysis, using the newly available 2010 and 2011 FRBNY Consumer Credit Panel data to determine whether those trends have continued.

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Posted by Blog Author at 11:00 AM in Household Finance, Mortgages | Permalink | Comments (1)

July 06, 2012

Historical Echoes: The Creation of the Contemporary U.S. Mortgage

Megan Cohen, New York Fed Research Library

Residential mortgages, as they are known in the United States, are fairly modern creatures. Their origins lie in medieval England, but they have contemporary roots in the Great Depression.

Continue reading "Historical Echoes: The Creation of the Contemporary U.S. Mortgage" »

Posted by Blog Author at 7:00 AM in Historical Echoes, Mortgages | Permalink | Comments (0)

December 05, 2011

“Flip This House”: Investor Speculation and the Housing Bubble

Andrew Haughwout, Donghoon Lee, Joseph Tracy, and Wilbert van der Klaauw

The recent financial crisis—the worst in eighty years—had its origins in the enormous increase and subsequent collapse in housing prices during the 2000s. While the housing bubble has been the subject of intense public debate and research, no single answer has emerged to explain why prices rose so fast and fell so precipitously. In this post, we present new findings from our recent New York Fed study that uses unique data to suggest that real estate “investors”—borrowers who use financial leverage in the form of mortgage credit to purchase multiple residential properties—played a previously unrecognized, but very important, role. These investors likely helped push prices up during 2004-06; but when prices turned down in early 2006, they defaulted in large numbers and thereby contributed importantly to the intensity of the housing cycle’s downward leg.

Continue reading "“Flip This House”: Investor Speculation and the Housing Bubble" »

Posted by Blog Author at 7:00 AM in Credit, Household Finance, Housing, Mortgages | Permalink | Comments (20)

September 06, 2011

Helping Unemployed Borrowers Meet Their Mortgage Payments

James Orr and Joseph Tracy

With unemployment very high, income loss is now the primary reason for mortgage default. Unemployed homeowners face tough choices. Those with equity in their house may attempt to sell it quickly. Alternatively, to keep their house while seeking a new job, they might deplete their savings, apply for a loan modification, or use other credit. Those with negative equity—who owe more on the mortgage than the property’s current value—have fewer choices, because selling the house won’t pay off the mortgage. All too often the home enters foreclosure and becomes costly for the family and the community. In this post, we examine how states may be able to offer special bridge loans to help jobless homeowners pay their mortgages and help protect neighborhoods and housing markets. Such initiatives could complement existing programs by helping many distressed homeowners before they miss any payments.


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Posted by Blog Author at 10:00 AM in Foreclosure, Housing, Mortgages, Unemployment | Permalink | Comments (0)

May 11, 2011

Why Are Adjustable Rate Mortgages So Rare These Days?

James Vickery

The fraction of mortgage borrowers who choose an adjustable-rate loan has fallen significantly over the past five years or so. Although the fraction edged up slightly in 2010, it remains close to historic lows, with less than 10 percent of mortgage originations since 2009 featuring an adjustable interest rate. What explains the striking decline? And what are its implications for borrowers and policymakers?

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Posted by Blog Author at 10:00 AM in Household Finance, Housing, Mortgages | Permalink | Comments (0)

March 21, 2011

Have Consumers Been Deleveraging?

Meta Brown, Andrew Haughwout, Donghoon Lee,
and Wilbert van der Klaauw


Since its peak in summer 2008, U.S. consumers’ indebtedness has fallen by more than a trillion dollars. Over roughly the same period, charge-offs—the removal of obligations from consumers’ credit reports because of defaults—have risen sharply, especially on loans secured by houses, which make up about 80 percent of consumer liabilities. An important question for gauging the behavior of U.S. consumers is how to interpret these two trends. Is the reduction in debts entirely attributable to defaults, or are consumers actively reducing their debts? In this post, we demonstrate that a significant part of the debt reduction was produced by consumers borrowing less and paying off debt more quickly—a process often called deleveraging.

Continue reading "Have Consumers Been Deleveraging?" »

Posted by Blog Author at 9:55 AM in Foreclosure, Household Finance, Mortgages | Permalink | Comments (7)
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