Publication Type

Working Paper

Publication Date

12-2017

Abstract

Post-crisis policy interventions significantly increased the demand for mortgage refinancing, but could this surge in refinancing applications have crowded out the supply of credit to home buyers? In this paper, we examine two frictions that hamper financial intermediation and result in banks' substitution of home purchase loans for refinance loans: The risk capacity channel through which banks with limited risk appetites prefer safer loans over riskier loans, and the operating capacity channel through which banks with limited operating capacities prefer applications that require less screening time. We find that following the recent financial crisis, banks facing these capacity constraints indeed rationed credit to home purchase borrowers.

Keywords

Credit rationing, mortgage lending, post-crisis slump, monetary transmission, distributional effects

Discipline

Finance | Finance and Financial Management

Research Areas

Finance

First Page

1

Last Page

55

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

https://ssrn.com/abstract=3065618

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