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Author: Austin Kelly Publisher: ISBN: Category : Languages : en Pages : 28
Book Description
Previous research has suggested the possibility that professional appraisals or econometric estimates of collateral value may be indicative of credit risk. This paper examines the issue by estimating the probability of a mortgage default (defined both as 90 day delinquency and as a claim on mortgage insurance) as a function of the difference between sales price of a home and the estimated value of the home at the time of the purchase, produced by both an appraisal and by an Automated Valuation Model (AVM). Logistic regression is used to estimate the quarterly hazard of a serious delinquency, or claim, as a function of a host of standard control variables, and the percent difference between the sales price and the appraisal and/or AVM estimate. The data consist of a nationally representative random sample of about 5,000 FHA insured single family mortgages endorsed in Fiscal Years 2000, 2001, and 2002, observed through January 31, 2006, and a sample of about 1,000 FHA loans from the Atlanta MSA in the same time period. The records are augmented with the results from an AVM. The difference between the sale price and the appraisal or AVM estimate is found to significantly increase the probability of delinquency, and increase the probability of foreclosure, significantly so in the national sample. Also, transactions that are valued with higher precision have lower default propensities. Additionally, the differences are found to increase loss given default in the small subset of loans that had completed the property disposition process.
Author: Austin Kelly Publisher: ISBN: Category : Languages : en Pages : 28
Book Description
Previous research has suggested the possibility that professional appraisals or econometric estimates of collateral value may be indicative of credit risk. This paper examines the issue by estimating the probability of a mortgage default (defined both as 90 day delinquency and as a claim on mortgage insurance) as a function of the difference between sales price of a home and the estimated value of the home at the time of the purchase, produced by both an appraisal and by an Automated Valuation Model (AVM). Logistic regression is used to estimate the quarterly hazard of a serious delinquency, or claim, as a function of a host of standard control variables, and the percent difference between the sales price and the appraisal and/or AVM estimate. The data consist of a nationally representative random sample of about 5,000 FHA insured single family mortgages endorsed in Fiscal Years 2000, 2001, and 2002, observed through January 31, 2006, and a sample of about 1,000 FHA loans from the Atlanta MSA in the same time period. The records are augmented with the results from an AVM. The difference between the sale price and the appraisal or AVM estimate is found to significantly increase the probability of delinquency, and increase the probability of foreclosure, significantly so in the national sample. Also, transactions that are valued with higher precision have lower default propensities. Additionally, the differences are found to increase loss given default in the small subset of loans that had completed the property disposition process.
Author: Michael LaCour-Little Publisher: ISBN: Category : Languages : en Pages :
Book Description
We empirically examine the effect of appraisal quality on subsequent mortgage loan performance using data from the high volatility housing market of Alaska in the 1980s. We develop measures of appraisal quality by computing the residual between a hedonic estimate of house value using available information from other appraisals compared to actual ex ante appraised value. We then estimate proportional hazard models of mortgage default and find that several measures of appraisal quality, particularly appraised value in excess of hedonic estimates, are significantly related to default risk. Using valuations subsequent to loan default, we are also able to evaluate how well house price indices perform in terms of estimating current loan-to-value and offer some additional evidence on the controversy over the role of net equity versus trigger events as determinants of mortgage default. We also show that defaults are related to ex ante measures of housing market conditions, with additional implications for underwriting policies and the current industry trend away from traditional appraisal and toward automated valuation.
Author: Maurizio d'Amato Publisher: Springer ISBN: 3319497464 Category : Technology & Engineering Languages : en Pages : 435
Book Description
This book addresses several problems related to automated valuation methodologies (AVM). Following the non-agency mortgage crisis, it offers a variety of approaches to improve the efficiency and quality of an automated valuation methodology (AVM) dealing with emerging problems and different contexts. Spatial issue, evolution of AVM standards, multilevel models, fuzzy and rough set applications and quantitative methods to define comparables are just some of the topics discussed.
Author: Paul S. Calem Publisher: ISBN: Category : Languages : en Pages : 57
Book Description
Home appraisals are produced for millions of residential mortgage transactions each year, but appraised values are rarely below the purchase contract price. We argue that institutional features of home mortgage lending cause much of the information in appraisals to be lost: some 30 percent of recent appraisals are exactly at the home price (with less than 10 percent below it). We lay out a novel, basic theoretical framework to explain how lenders' and appraisers' incentives lead to information loss in appraisals (that is, appraisals set equal to the contract price). Such information loss is more common at loan-to-value boundaries where mortgage insurance rates increase and appears to be associated with a higher incidence of mortgage default, after controlling for pertinent borrower and loan-level characteristics. Appraisals do, in some cases, improve default risk measurement, but they are less informative than automated valuation models. An important benefit of appraisals reported below the contract price is that they help borrowers renegotiate prices with sellers.
Author: Andrew Davidson Publisher: Oxford University Press ISBN: 0199363684 Category : Business & Economics Languages : en Pages : 465
Book Description
Mortgage-backed securities (MBS) are among the most complex of all financial instruments. Analysis of MBS requires blending empirical analysis of borrower behavior with the mathematical modeling of interest rates and home prices. Over the past 25 years, Andrew Davidson and Alexander Levin have been at the leading edge of MBS valuation and risk analysis. Mortgage Valuation Models: Embedded Options, Risk, and Uncertainty contains a detailed description of the sophisticated theories and advanced methods that the authors employ in real-world analyses of mortgage-backed securities. Issues such as complexity, borrower options, uncertainty, and model risk play a central role in the authors' approach to the valuation of MBS. The coverage spans the range of mortgage products from loans and TBA (to-be-announced) pass-through securities to subordinate tranches of subprime-mortgage securitizations. With reference to the classical CAPM and APT, the book advocates extending the concept of risk-neutrality to modeling home prices and borrower options, well beyond interest rates. It describes valuation methods for both agency and non-agency MBS including pricing new loans; approaches to prudent risk measurement, ranking, and decomposition; and methods for modeling prepayments and defaults of borrowers. The authors also reveal quantitative causes of the 2007-09 financial crisis and provide insight into the future of the U.S. housing finance system and mortgage modeling as this field continues to evolve. This book will serve as a foundation for the future development of models for mortgage-backed securities.
Author: Hamp Thomas Publisher: Hamp Thomas ISBN: 9781475107906 Category : Languages : en Pages : 182
Book Description
Like no event in history, the real estate appraisal industry has been slandered, steered, and stomped into submission. Charged and convicted of a crime they did not commit. Big banking is leading a new revolution, taking real estate appraisers out of the mortgage lending process. Enter computerized home valuation services, being promoted as the "technology-based" saviors to the home buying public. The greatest sales job ever, sold to a real estate weary public who just wants to know they are paying a fair price. Discover the misinformation that is killing an entire industry that consumers need now more than ever before. Caveat Emptor!
Author: William B. Shear Publisher: DIANE Publishing ISBN: 1437988695 Category : Law Languages : en Pages : 60
Book Description
Real estate valuations, which encompass appraisals and other estimation methods, have come under increased scrutiny in the wake of the recent mortgage crisis. The Dodd- Frank Wall Street Reform and Consumer Protection Act mandated this study of the various valuation methods and the options available for selecting appraisers, as well as the Home Valuation Code of Conduct, which established appraiser independence requirements for mortgages sold to Fannie Mae and Freddie Mac. This report examined: (1) the use of different valuation methods; (2) factors affecting consumer costs for appraisals and appraisal disclosure requirements; and (3) conflict-of-interest and appraiser selection policies and views on their impact. A print on demand report.
Author: Doug Warr Publisher: Iaao Technical Standards ISBN: 9780883292457 Category : Education Languages : en Pages : 60
Book Description
International Association of Assessing Officers (IAAO) maintains technical standards that reflect the official position of IAAO on various topics related to property tax administration, property tax policy, and valuation of property including mass appraisal and related disciplines. These standards are adopted by the IAAO Executive Board.IAAO assessment standards represent a consensus in the assessing profession. The objective of the IAAO standards is to provide a systematic means by which assessing officers can improve and standardize the operation of their offices. The IAAO standards are advisory in nature and the use of, or compliance with, these standards is purely voluntary. If any portion of these standards is found to be in conflict with the Uniform Standards of Professional Appraisal Practice (USPAP) or state laws, USPAP and state laws shall govern.IAAO technical standards are intended to guide property tax assessment officials, tax policy analysts, and administrators. Similar issues arise in any nation's property tax systems. IAAO standards can provide guidance internationally. However, certain sections of these standards apply primarily to the United States and Canada, where the power to tax property is assigned to state, provincial, or territorial governments.
Author: Michael Neal Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Appraisal bias has emerged as one of the most controversial issues in the mortgage industry. Several recent studies have documented systematic biases in traditional appraisals that result in lower values for Black and Hispanic homebuyers and neighborhoods (Rothwell and Perry, 2019). This in part explains the persistent wealth gap between Black and White households.In this paper, we examine the effects of historical redlining on automated home valuations (AVMS) and prices paid by homebuyers in predominately Black neighborhoods. Home valuation methods, i.e., appraisals, are critical to determining the market value of a home, the equity a mortgage borrower holds in a property, and the amount of default risk to which a lender or investor is exposed. Proponents of AVMs argue that they not only reduce biases and errors committed by human appraisers, while critics of AVMs caution that these algorithms simply reproduce the same biases that are embedded in human-driven decision systems. Based on an analysis of 2018 home sale transactions in Atlanta and Home Owners Loan Corporation (HOLC) 'redlining' maps, we find that both historic redlining and neighborhood race have a significant impact on current home values and prices paid by homebuyers. Specifically, holding other factors constant, home prices in historic redlined neighborhoods are associated with a 49.3% undervaluation. Similarly, all else equal, compared with majority-white neighborhoods, home prices in majority-Black neighborhoods are 64.2 % lower.Our analysis illustrates the role that historical racism plays in house prices and automated valuation model error within majority-Black communities and the extent to which these dynamics may contribute to the broader Black-white wealth gap.Based on these findings, we propose several steps that the federal government can take to address the disparities in house prices and automated valuation model error. These recommendations can help account for the effects of past discrimination and ensure that Black communities and their residents benefit from homeownership to the same degree as their white counterparts.
Author: Austin Kelly
Author: Austin Kelly
Author: Michael LaCour-Little
Author: Maurizio d'Amato
Author: Paul S. Calem
Author: Andrew Davidson
Author: Mary Lou Downie
Author: Hamp Thomas
Author: William B. Shear
Author: Doug Warr
Author: Michael Neal