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Property Valuation
The Federation’s Valuation Committee, which largely gathers together practitioners in the field of property
valuation from a variety of EU member states, aims to enhance transparency on property valuation for mortgage
lending purposes in Europe. Accurate and transparent property valuations are essential to the mortgage lending
business as this promotes confidence in the collateral system. As such, it represents one of the major building
blocks of the mortgage system. The lender requires certainty that the asset being taken as a guarantee for a
housing loan is of a certain value and will cover losses should the loan default. This confidence in the property
price is one of the elements, which make mortgage debt a low risk and a cheap way of providing housing finance.
Valuation & the Integration of Europe’s Mortgage Markets
The EMF is following closely the evolution of the Commission’s reflections on the Integration of European Mortgage
Markets. In the context of the first step in the Commission’s work in this area i.e. the Forum Group on Mortgage
Credit, the Federation’s experts inputted extensively into its discussions. In this context and in an attempt to
improve transparency with respect to property valuation and capital adequacy, the Committee drafted a
recommendation on risk related criteria that should be used when interpreting property valuation in order to
improve the quality of valuations. These criteria, which were taken up by the Forum Group in its final Report,
include:
- Market risks
- Location risks
- Construction Related Property Risks
- Tenants/leases
- Fiscal and legal rules
The criteria should prove to be a useful tool in the measurement, management and reduction of credit risk and in
the improvement of lending decisions. The profile is intended to enhance the quality of valuations by covering what
could be of interest to mortgage lenders.
Further to the publication of and subsequent consultation on the Commission’s Green Paper in 2005, which marked the
next step in the Commission’s assessment of the efficiency of European Mortgage Markets, the Federation’s experts
submitted a Position on property valuation, in the context of the Federation’s overall response to the Green Paper
consultation dated 30 November 2005. In this Position Paper, the EMF supported the application of guidelines on
best practice in specific areas i.e. valuers’ qualifications, definitions of values and reporting, and mutual
recognition, complemented by the application of internationally-recognised standards, for national valuation
methodologies.
At the beginning of 2006, the Commission announced that in addition to the extension of its investigation to
specific primary market issues and secondary markets, it would also investigate certain issues, of which valuation
was one, on a bilateral basis with interested stakeholders. The EMF welcomed the opportunity to provide the
Commission with more detailed information on its Position on the valuation of property for lending purposes. As the
representative of mortgage lenders, who are valuers (internal to the credit institution) or the customers of
valuers, the EMF is able to add value to the Commission’s assessment through a position, which is distinct from
that of the valuation profession itself.
In this context, the EMF has met a number of times with the Commission and has provided specific input on the basis
of the EMF’s Position on property valuation in a series of Position Papers.
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