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

36 Pages Posted: 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: July 2015

Abstract

The accuracy of appraisals came into scrutiny during the housing crisis, and a set of policies and regulations was adopted to address the conflict-of-interest issues in the appraisal practices. In response to an investigation by the New York State Attorney General’s office, the Home Valuation Code of Conduct (HVCC) was agreed to by Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency. 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 led to a reduction in the probability of inflated valuations, although valuations remained inflated on average, and induced a significant increase in the incidence of low appraisals. The well-intentioned HVCC rule made it more difficult to obtain mortgages to purchase homes during the housing price crash, possibly exacerbating the fall in prices.

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 (July 2015). FRB of Philadelphia Working Paper No. 15-28, Available at SSRN: https://ssrn.com/abstract=2635461 or http://dx.doi.org/10.2139/ssrn.2635461

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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