We hypothesize that the intrinsic benefit required to trigger a refinancing has become smaller, due to a combination of technological, regulatory, and structural changes that have made mortgage origination more competitive and more efficient and have raised financial awareness of homeowners. To...

We hypothesize that the intrinsic benefit required to trigger a refinancing has become smaller, due to a combination of technological, regulatory, and structural changes that have made mortgage origination more competitive and more efficient. To test this hypothesis, we estimate an empirical...

The optimal prepayment model asserts that rational homeowners will refinance if they can reduce the current value of their liabilities by an amount greater than the refinancing threshold, defined as the cost of carrying the transaction plus the time value of the embedded call option. To compute...

We hypothesize that the intrinsic benefit required to trigger a refinancing has become smaller due to a combination of technological, regulatory, and structural changes that have made mortgage origination more competitive and more efficient. To test this hypothesis, we estimate an empirical...

The optimal prepayment model asserts that rational homeowners would refinance if they can reduce the current value of their liabilities by an amount greater than the refinancing threshold, defined as the cost of carrying the transaction plus the time value of the embedded call option. To compute...

We study early default, defined as serious delinquency or foreclosure in the first year, among nonprime mortgages from the 2001 to 2007 vintages. After documenting a dramatic rise in such defaults and discussing their correlates, we examine two primary explanations: changes in underwriting...