Author： Rudolph P.M.
Publisher： Academic Press
ISSN： 1051-1377
Source： Journal of Housing Economics, Vol.7, Iss.2, 1998-06, pp. : 165-179
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Abstract
Appraiser licensing and appraisal standards were mandated by FIRREA to improve the quality of information available to mortgage lenders. In this paper, the effectiveness of the mandatory system is compared with the effectiveness of the pre-FIRREA voluntary system. Both have the potential to solve the adverse selection and moral hazard problems involved in hiring an appraiser. The role of the deposit insurance system in reducing the value of information by reducing cost of defaults borne by lender is also examined. In the limit, if the lender bears no default losses the lender has no incentive to buy information.
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