Information losses in home purchase appraisals

Paul S. Calem, Lauren Lambie-Hanson and Leonard Nakamura

No 15-11, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Home appraisals are produced for millions of residential mortgage transactions each year, but appraisals are rarely below the transaction price. We exploit a unique data set to show that the mortgage application process creates an incentive to substitute the transaction price for the true appraised value when the latter is lower. We relate the frequency of information loss (appraisals set equal to transaction price) to market conditions and other factors that plausibly determine the degree of distortion. Information loss in appraisals may increase the procyclicality of housing booms and busts.

Keywords: Information; Mortgage; Regulation; Appraisal (search for similar items in EconPapers)
JEL-codes: D81 G14 G21 G28 L85 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-03-06
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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