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Cost, Value, and Hybrid-Based Underwriting Criteria

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Abstract

This study examines the correlation between loan-to-value ratios and probability of default, and tests alternative cost-based default models, using data from the portfolios of FSLIC and a major regional lender. The theoretical premises for the research are synthesized from a review of the linkages between supply and demand for space, and for capital; and of the appraisal process and its reliability. Two major conclusions are drawn from statistical evidence: (1) there is no apparent correlation between value-based underwriting criteria and between default, and (2) hard cost-based criteria correlate closely to probability of default.

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  • M. Atef Sharkawy & Walter C. Barnes, 1992. "Cost, Value, and Hybrid-Based Underwriting Criteria," Journal of Real Estate Research, American Real Estate Society, vol. 7(2), pages 169-186.
    • Handle: RePEc:jre:issued:v:7:n:2:1992:p:169-186
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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