NBER Publications by Benjamin J. Keys

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Working Papers and Chapters and Reporter Articles

March 2015Regional Redistribution Through the U.S. Mortgage Market
with Erik Hurst, Amit Seru, Joseph S. Vavra: w21007
Regional shocks are an important feature of the U.S. economy. Households' ability to self-insure against these shocks depends on how they affect local interest rates. In the United States, most borrowing occurs through the mortgage market and is influenced by the presence of government-sponsored enterprises (GSEs). We establish that despite large regional variation in predictable default risk, GSE mortgage rates for otherwise identical loans do not vary spatially. In contrast, the private market does set interest rates that vary with local risk. We use a spatial model of collateralized borrowing to show that the national interest rate policy substantially affects welfare by redistributing resources across regions.
October 2014Mortgage Rates, Household Balance Sheets, and the Real Economy
with Tomasz Piskorski, Amit Seru, Vincent Yao: w20561
This paper investigates the impact of lower mortgage rates on household balance sheets and other economic outcomes during the housing crisis. We use proprietary loan-level panel data matched to consumer credit records using borrowers' Social Security numbers, which allows for accurate measurement of the effects. Our main focus is on borrowers with agency loans, which constitute the vast majority of U.S. mortgage borrowers. Relying on variation in the timing of resets of adjustable rate mortgages, we find that a sizable decline in mortgage payments ($150 per month on average) induces a significant drop in mortgage defaults, an increase in new financing of durable consumption (auto purchases) of more than 10% in relative terms, and an overall improvement in household credit standing. New fin...
August 2014Failure to Refinance
with Devin G. Pope, Jaren C. Pope: w20401
Households that fail to refinance their mortgage when interest rates decline can lose out on substantial savings. Based on a large random sample of outstanding U.S. mortgages in December of 2010, we estimate that approximately 20% of households for whom refinancing would be optimal and who appeared unconstrained to do so, had not taken advantage of the lower rates. We estimate the present-discounted cost to the median household who fails to refinance to be approximately $11,500, making this a particularly large consumer financial mistake. To shed light on possible mechanisms and corroborate our main findings, we also provide results from a mail campaign targeted at a sample of homeowners that could benefit from refinancing.
August 2012Mortgage Financing in the Housing Boom and Bust
with Tomasz Piskorski, Amit Seru, Vikrant Vig
in Housing and the Financial Crisis, Edward L. Glaeser and Todd Sinai, editors
This chapter traces the rapid evolution of mortgage financing from boom to bust and explores two crucial questions surrounding the market's rise and fall. First, why did the lending boom occur in the size and form that it did? Second, why has the foreclosure crisis been both cataclysmic and heterogeneous across geography and loan types? The chapter is organized as follows. Section 4.2 presents a broad set of descriptive statistics and facts regarding the rise and fall of the subprime mortgage market. Section 4.3 addresses the question of why there was a lending boom of this sort. Section 4.4 discusses the "prolonged" foreclosure crisis that prompted a number of policy responses by the government. The chapter concludes with a broad perspective on the future of mortgage finance and lessons l...

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