 Appraisal inflation: Evidence from the 2009 GSE HVCC interventionLan Shi and Yan Zhang Journal of Housing Economics, 2015, vol. 27, issue C, 71-90 Abstract: Appraisal inflation is a prominent aspect of lax underwriting practice. The GSE May 2009 Home Valuation Code of Conduct (HVCC) aims to prohibit lenders from influencing appraisers. Refinance loans, without a transaction price, are potentially more susceptible to appraisal inflation than purchase loans. We use GSE refinance loans as our treatment group and non-GSE refinance loans as the control group, and find that GSE refinance loans originated after May 2009 have lower default rates than non-GSE refinance loans. We further measure the appraisal inflation (bias) as the difference between the appraisal value in a 2009 refinance transaction and the actual transaction price in an earlier purchase transaction for the same property adjusted for local housing value changes. We find that the reduction in appraisal bias was larger for GSE refinance loans than for non-GSE refinance loans. This paper quantifies the “contribution” of appraisal inflation in poor loan underwriting standards and highlights the importance of unbiased and independent appraisal. Keywords: Appraisal; Appraisal bias; Appraisal inflation; Appraisal independence; GSE; HVCC (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:27:y:2015:i:c:p:71-90 DOI: 10.1016/j.jhe.2015.02.007 Access Statistics for this article Journal of Housing Economics is currently edited by H. O. Pollakowski More articles in Journal of Housing Economics from Elsevier |
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