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Collateral Valuation and Borrower Financial Constraints: Evidence from the Residential Real Estate Market / Sumit Agarwal, Itzhak Ben-David, Vincent Yao.
- Format:
- Book
- Author/Creator:
- Agarwal, Sumit.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w19606.
- NBER working paper series no. w19606
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Collateral Valuation and Borrower Financial Constraints
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- 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.
- Notes:
- Print version record
- October 2013.
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