This paper explores the practice of mortgage refinancing in a dynamic competitive lending model with risky borrowers and costly default. We show that prepayment penalties improve welfare by ensuring longer-term lending contracts, which prevents the mortgage pools from becoming disproportionately...

We develop a tractable general equilibrium framework of housing and mortgage markets with aggregate and idiosyncratic risks, costly liquidity and strategic defaults, empirically relevant informational asymmetries, and endogenous mortgage design. We show that adverse selection plays an important...

Bank balance sheet lending is commonly viewed as the predominant form of lending. We document and study two margins of adjustment that are usually absent from this view using microdata in the $10 trillion U.S. residential mortgage market. We first document the limits of the shadow bank...

We follow a representative panel of millions of consumers in the U.S. from 2007 to 2017 and document several facts on the long-term effects of the Great Recession. There were about six million foreclosures in the ten-year period after Lehman's collapse. Owners of multiple homes accounted for 25%...

Using proprietary loan-level data, we examine the ability of the government to impact mortgage refinancing activity and spur consumption by focusing on the Home Affordable Refinancing Program (HARP). The policy relaxed housing equity constraints by extending government credit guarantee on...

This paper investigates the impact of lower mortgage rates on household balance sheets and other economic outcomes during the housing crisis. We use proprietary loan-level panel data matched to consumer credit records using borrowers' Social Security numbers, which allows for accurate...

We contend that buyers received false information about the true quality of assets in contractual disclosures by intermediaries during the sale of mortgages in the $2 trillion non-agency market. We construct two measures of misrepresentation of asset quality - misreported occupancy status of...

We evaluate the effects of the 2009 Home Affordable Modification Program (HAMP) that provided intermediaries with sizeable financial incentives to renegotiate mortgages. HAMP increased intensity of renegotiations and prevented substantial number of foreclosures but reached just one-third of its...

We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by U.S. state government lawsuits against Countrywide Financial Corporation, which agreed to offer modifications to seriously...

We study the rise of shadow banks in the largest consumer loan market in the US. The market share of shadow banks in originating residential mortgages nearly doubled from 2007-2015. Shadow banks gained a larger market share among less creditworthy borrowers, with a significant share of loans...