Can regulation de-bias appraisers?

Sumit Agarwal, Brent William Ambrose, Vincent W. Yao

Research output: Contribution to journalArticle

Abstract

This paper examines the effect of a regulatory action (the Home Valuation Code of Conduct) that was designed to reduce the incidence of inflated collateral valuations. We identify the impact of the regulation using a difference-in-difference identification strategy. Our baseline results confirm that the regulation reduced inflated valuations in refinance transactions by 16% in the large lender sample, compared to small lenders and a placebo sample. The effect is most significant in low-liquidity and low-distress markets, but not in other markets. We find that the regulation had a significant impact on loan to value ratio and interest rate, and it also led to a significant increase in defaults but a decrease in prepayments.

Original languageEnglish (US)
Article number100827
JournalJournal of Financial Intermediation
DOIs
StateAccepted/In press - Jan 1 2019

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Codes of conduct
Loans
Prepayment
Distress
Difference-in-differences
Interest rates
Liquidity

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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Can regulation de-bias appraisers? / Agarwal, Sumit; Ambrose, Brent William; Yao, Vincent W.

In: Journal of Financial Intermediation, 01.01.2019.

Research output: Contribution to journalArticle

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