The Impact of the Home Valuation Code of Conduct on Appraisal and Mortgage Outcomes

Posted: 12 Sep 2014 Last revised: 25 Jul 2015

See all articles by Lei Ding

Lei Ding

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Multiple version iconThere are 3 versions of this paper

Date Written: August 1, 2014

Abstract

During the housing crisis, it came to be recognized that inflated home mortgage appraisals were widespread during the subprime boom. The New York State Attorney General’s office investigated this issue with respect to one particular lender and Fannie Mae and Freddie Mac. The investigation resulted in an agreement between the Attorney General’s office, the government-sponsored enterprises (GSEs), and the Federal Housing Finance Agency (the GSEs’ federal regulator) in 2008, in which the GSEs agreed to adopt the Home Valuation Code of Conduct (HVCC). Using unique data sets that contain both approved and nonapproved mortgage applications, this study provides an empirical examination of the impact of the HVCC on appraisal and mortgage outcomes. The results suggest that the HVCC has reduced the probability of inflated valuations and induced a significant increase in low appraisals. The HVCC also made it more difficult to obtain mortgages in the aftermath of the financial crisis.

Keywords: Property Valuation, Mortgage, Regulation, Appraisal

JEL Classification: G21, G28, R38

Suggested Citation

Ding, Lei and Nakamura, Leonard I., The Impact of the Home Valuation Code of Conduct on Appraisal and Mortgage Outcomes (August 1, 2014). FRB of Philadelphia Working Paper No. 14-23. Available at SSRN: https://ssrn.com/abstract=2494345 or http://dx.doi.org/10.2139/ssrn.2494345

Lei Ding (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3804 (Phone)
215-574-4364 (Fax)

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