Systemic risk and the refinancing ratchet effect

• 成果类型: Article
• 署名作者: Khandani, Amir E.; Lo, Andrew W.; Merton, Robert C.
• 署名单位: Morgan Stanley; Massachusetts Institute of Technology (MIT); Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.10.007
• 发表日期: 2013
• 页码: 29-45
• 关键词: systemic risk; Financial crisis; household finance; Real estate; Subprime mortgage

摘要

The combination of rising home prices, declining interest rates, and near-frictionless refinancing opportunities can create unintentional synchronization of homeowner leverage, leading to a ratchet effect on leverage because homes are indivisible and owner-occupants cannot raise equity to reduce leverage when home prices fall. Our simulation of the U.S. housing market yields potential losses of $1.7 trillion from June 2006 to December 2008 with cash-out refinancing vs. only $330 billion in the absence of cash-out refinancing. The refinancing ratchet effect is a new type of systemic risk in the financial system and does not rely on any dysfunctional behaviors. (C) 2012 Elsevier B.V. All rights reserved.