Seminar Vol. 193

Title: Macroeconomic Effects of the Mortgage Refinance and the Home Equity Lines of Credit

Speaker: Jiseob Kim, Yonsei University

Time: November 1st, 2019    13:30-15:00

Venue: Conference Room 106B, IESR, Zhonghui Building (College of Economics) 

About the speaker:

Jiseob Kim is a tenure-track Assistant Professor of Economics at Yonsei University in South Korea. His research areas are macroeconomics, real estate economics, and financial economics. Especially, he is interested in household finance issues in the real estate market. He completed his Ph.D. in economics at the University of Rochester. Before coming to Yonsei University, he worked as an Associate Fellow at Korea Development Institute (KDI) – the government-sponsored economic research and policy think tank – from 2013 to 2017. His research has been published in high ranked field journals such as Journal of Money, Credit, and Banking, Journal of Economic Dynamics and Control, Macroeconomic Dynamics, Journal of Macroeconomics, and Economic Modelling.

Abstract:

I examine how the mortgage refinance and the home equity lines of credit (HELOC) impact the increase in pre-crisis mortgage debt and post-crisis mortgage defaults. Financially constrained homeowners can cash out funds through refinancing mortgages or extract home equity through the HELOC. My quantitative exercise shows that prevalent usage of the refinance or the HELOC contribute to an increase in pre-crisis mortgage debt, which amplifies the post-crisis foreclosure rate. Next, I consider counter-factual policy directions for mitigating post-crisis mortgage defaults. An increase in post-crisis costs to access the HELOC can be effective.