The Valuation of Mortgage Security by Italian Banks

The Bank of Italy has recently promulgated rules to implement the recommendations of Basel II, including requirements for appraisals of properties serving as security for mortgage loans. This article describes a research/consulting project on the methods and procedures used by professionals in valuing the properties. A sample of banks was studied to assess the condition of the banks regarding residential loans and the valuation processes used by the professionals that they hire. The findings show that these banks suffer few defaults and foreclosures on 1-4 family residences, although the appraisals contain deficiencies in terms of data, methods, and techniques.