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Collateral value uncertainty and mortgage credit provision

Author

Listed:
  • Jiang, Erica Xuewei
  • Zhang, Anthony Lee

Abstract

Houses with higher value uncertainty receive less mortgage credit: mortgages backed by these houses are more likely to be rejected, have higher interest rates, and have lower loan-to-price ratios. The relationship between house value uncertainty and credit availability is driven partly by a classic channel in which uncertainty lowers debt recovery rates, and partly by a novel channel where more uncertain appraisals make regulatory constraints on loan size more likely to bind. We build a structural model to quantify the effects of each channel, and show how a shift toward computerized asset appraisals could influence credit access.

Suggested Citation

  • Jiang, Erica Xuewei & Zhang, Anthony Lee, 2025. "Collateral value uncertainty and mortgage credit provision," Journal of Financial Economics, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:jfinec:v:169:y:2025:i:c:s0304405x25000625
    DOI: 10.1016/j.jfineco.2025.104054
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    More about this item

    Keywords

    Collateral; Mortgages; Price dispersion; Appraisals;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G5 - Financial Economics - - Household Finance

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