Credit, Equity, and Mortgage Refinancings

[...]This article significantly advances the literature onmortgage prepayments by introducing quantitative measuresof individual homeowner credit histories to the loan-levelanalysis of the factors influencing the probability that a homeownerwill refinance. In addition to credit histories, we includein the analysis changes in individual homeowner’s equity and inthe overall lending environment. Our findings strongly supportthe hypothesis that, other things being equal, the worse a homeowner’scredit rating, the lower the probability that he or shewill refinance. We also confirm the finding of other researchersthat changes in home equity strongly influence the probabilityof refinancing. Finally, we provide evidence of a change in thelending environment that, all else being equal, hasincreased the probability that a homeowner will refinance.[...]