Refinancing Trends among Lower Income and Minority Homeowners during the Housing Boom and Bust

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Abstract

This article examines trends in mortgage refinancing activity during the housing boom and bust, with a focus on homeowners in lower income and minority market (LIMM) areas. Unlike any other period in recent history, during the boom LIMM homeowners refinanced their mortgages more frequently than non-LIMM homeowners. This occurred primarily among borrowers for whom the refinance option was not in-the-money, and it is likely attributable to the concurrent growth of subprime, cash-out refinancing. Following the 2007 mortgage market collapse, however, LIMM homeowners were less likely to refinance. This can be explained in part by systematic differences in home equity levels across borrowers.

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