Research Details

Abstract

There are large cross-sectional differences in how often US borrowers refinance mortgages. In this paper, we develop an equilibrium mortgage pricing model that allows us to explore the con- sequences of this heterogeneity. We show that equilibrium forces imply important cross-subsidies from borrowers who rarely refinance to those who refinance often. Mortgage reforms can po- tentially reduce these regressive cross-subsidies, but the equilibrium effects of these reforms can also have important distributional consequences. For example, many policies which lead to more frequent refinancing lead to higher equilibrium mortgage rates and reduce residential mortgage credit access for a large number of borrowers.

Type

Working Paper

Author(s)

Konstantin Milbradt, David Berger, Joe Vavra, Fabrice Tourre

Date Published

2023

Citations

Milbradt, Konstantin, David Berger, Joe Vavra, and Fabrice Tourre. 2023. Refinancing frictions, mortgage pricing and redistribution.