Subprime Refinancing: Equity Extraction and Mortgage Termination
研究了次级抵押贷款市场中借款人通过再融资提取住房权益的行为，发现现金提取再贷款相比普通再贷款更不易违约或提前还款，且对利率和房价变化更敏感。
This article examines the choice of borrowers to extract wealth from housing in the high‐cost (subprime) segment of the mortgage market and assesses the prepayment and default performance of these cash‐out refinance loans relative to the rate of refinance loans. Consistent with survey evidence, the propensity to extract equity is sensitive to the relative interest rates of other forms of consumer debt. After the loan is originated, our results indicate that cash‐out refinances perform differently from non–cash‐out refinances. For example, cash‐outs are less likely to default or prepay, and the termination of cash‐outs is more sensitive to changing interest rates and house prices.