Collateral Valuation and Borrower Financial Constraints: Evidence from the Residential Real-Estate Market

Sumit Agarwal, Itzhak Ben-David and Vincent Yao
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Vincent Yao: Fannie Mae

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Financially-constrained borrowers have the incentive to influence the appraisal process in order to increase borrowing or reduce the interest rate. The average valuation bias for residential refinance transactions is above 5%. The bias is larger for highly leveraged transactions, and for transactions mediated through a broker, especially where competition is high. Mortgages with inflated valuations default more often; however, lenders partially account for the valuation bias through pricing.

JEL-codes: G01 G21 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-fmk, nep-sea and nep-ure
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Collateral Valuation and Borrower Financial Constraints: Evidence from the Residential Real Estate Market (2015)
Working Paper: Collateral Valuation and Borrower Financial Constraints: Evidence from the Residential Real Estate Market (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2012-29

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