NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Collateral Valuation and Borrower Financial Constraints: Evidence from the Residential Real Estate Market

Sumit Agarwal, Itzhak Ben-David, Vincent Yao

NBER Working Paper No. 19606
Issued in October 2013
NBER Program(s):AP, CF, LE, LS, POL

Financially constrained borrowers have the incentive to influence the appraisal process in order to increase borrowing or reduce the interest rate. We document that the average valuation bias for residential refinance transactions is above 5%. The bias is larger for highly leveraged transactions, around critical leverage thresholds, and for transactions mediated through a broker. Mortgages with inflated valuations default more often; however, lenders partly account for the valuation bias through pricing.

download in pdf format
   (267 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19606

Published: “Collateral Valuation and Institutional Pressures: Evidence from the Residential Real-Estate Market” (with Ben-David, Z., and V. Yao), Management Science, 2015, Vol. 61(9), Pp.2220-2240 citation courtesy of

Users who downloaded this paper also downloaded* these:
Aizenman and Jinjarak w19190 Real Estate Valuation, Current Account and Credit Growth Patterns, Before and After the 2008-9 Crisis
Keys, Piskorski, Seru, and Yao w20561 Mortgage Rates, Household Balance Sheets, and the Real Economy
Fetter w19604 The Home Front: Rent Control and the Rapid Wartime Increase in Home Ownership
Bordo and Landon-Lane w19584 What Explains House Price Booms?: History and Empirical Evidence.
Agarwal and Ben-David w19945 Loan Prospecting and the Loss of Soft Information
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us