FRIC/Finance Seminar with Anthony A. DeFusco, Northwestern University
The Department of Finance and FRIC, Center for Financial Frictions, are proud to announce the upcoming seminar with Anthony A. DeFusco, Kellogg School of Management, Northwestern University.
Anthony A. DeFusco will present:
No Job, No Money, No Refi: Frictions to Refinancing in a Recession
We study how employment documentation requirements and out-of-pocket closing costs constrain mortgage reﬁnancing. These frictions, which bind most severely during re-cessions, may signiﬁcantly inhibit monetary policy pass-through. To study their eﬀects on reﬁnancing, we exploit an FHA policy change that excluded unemployed borrowers from reﬁnancing and increased others’ out-of-pocket costs substantially. These changes dramatically reduced reﬁnancing rates, particularly among the likely unemployed and those facing new out-of-pocket costs. Our results imply that unemployed and liquidity-constrained borrowers have a high latent demand for reﬁnancing. Cyclical variation in these factors may therefore aﬀect both the aggregate and distributional consequences of monetary policy.
Solbjerg Plads 3,