John Mondragon, Senior Economist, Federal Reserve Bank of San Francisco

John Mondragon

Senior Economist

Household finance, Real estate finance, and Macroeconomics

john.mondragon(at)sf.frb.org

CV (pdf, 90.7 kb)

Profiles: Personal website

Published Articles (Refereed Journals and Volumes)
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No Job, No Money, No Refi: Frictions to Refinancing in a Recession

Forthcoming in Journal of Finance | With DeFusco

abstract (+)
We study how employment documentation requirements and out‐of‐pocket closing costs constrain mortgage refinancing. These frictions, which bind most severely during recessions, may significantly inhibit monetary policy pass‐through. To study their effects on refinancing, we exploit an FHA policy change that excluded unemployed borrowers from refinancing and increased others’ out‐of‐pocket costs substantially. These changes dramatically reduced refinancing rates, particularly among the likely unemployed and those facing new out‐of‐pocket costs. Our results imply that unemployed and liquidity‐constrained borrowers have a high latent demand for refinancing. Cyclical variation in these factors may therefore affect both the aggregate and distributional consequences of monetary policy.
Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data

Forthcoming in Journal of European Economic Association | With Coibion, Gorodnichenko, and Kudlyak

abstract (+)
Using household-level debt data over 2000-2012 and local variation in inequality, we show that low-income households in high-inequality regions (zip-codes, counties, states) accumulated less debt (relative to their income) than low-income households in lower-inequality regions, contrary to the prevailing view. Furthermore, the price of credit is higher and access to credit is harder for low-income households in high-inequality versus low-inequality regions. Lower quantities combined with higher prices suggest that the debt accumulation pattern by household income across areas with different inequality is a result of credit supply rather than credit demand. We propose a lending model to illustrate the mechanism.
Regulating Household Leverage

The Review of Economic Studies 87(2), March 2020, 914-958

abstract (+)
This article studies how credit markets respond to policy constraints on household leverage. Exploiting a sharp policy-induced discontinuity in the cost of originating certain high-leverage mortgages, we study how the Dodd–Frank “Ability-to-Repay” rule affected the price and availability of credit in the U.S. mortgage market. Our estimates show that the policy had only moderate effects on prices, increasing interest rates on affected loans by 10–15 basis points. The effect on quantities, however, was significantly larger; we estimate that the policy eliminated 15% of the affected market completely and reduced leverage for another 20% of remaining borrowers. This reduction in quantities is much greater than would be implied by plausible demand elasticities and indicates that lenders responded to the policy not only by raising prices but also by exiting the regulated portion of the market. Heterogeneity in the quantity response across lenders suggests that agency costs may have been one particularly important market friction contributing to the large overall effect as the fall in lending was substantially larger among lenders relying on third-parties to originate loans. Finally, while the policy succeeded in reducing leverage, our estimates suggest this effect would have only slightly reduced aggregate default rates during the housing crisis.