Collateral Valuation and Borrower Financial Constraints: Evidence from the Residential Real-Estate Market
AbstractFinancially-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.
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Bibliographic InfoPaper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2012-29.
Date of creation: Dec 2012
Date of revision:
Other versions of this item:
- Sumit Agarwal & Itzhak Ben-David & Vincent Yao, 2013. "Collateral Valuation and Borrower Financial Constraints: Evidence from the Residential Real Estate Market," NBER Working Papers 19606, National Bureau of Economic Research, Inc.
- G01 - Financial Economics - - General - - - Financial Crises
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-FMK-2013-01-19 (Financial Markets)
- NEP-SEA-2013-01-19 (South East Asia)
- NEP-URE-2013-01-19 (Urban & Real Estate Economics)
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