Collateral Damage: Refinancing Constraints and Regional Recessions.

In the current structure of the U.S. residential mortgage market, a decrease in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of declining interest rates. In this paper, the authors show that this form of collateral constraint has greatly reduced refinancing in states with depressed property markets. They outline the interaction between regional recessions and refinancing constraints. Copyright 1997 by Ohio State University Press.