The new forward-looking credit loss provisioning standard, CECL, is intended to promote proactive provisioning as loan loss reserves can be conditioned on expectations of the economic cycle. We study the degree to which one modeling decisionexpectations about the path of future house prices -affects the size and timing of provisions for first-lien residential mortgage portfolios. While we find that provisions are generally less pro-cyclical compared to the current incurred loss standard, CECL may complicate the comparability of provisions across banks and time. Market participants will need to disentangle the degree to which variation in provisions across firms is driven by underlying risk versus differences in modeling assumptions.

The new forward-looking credit loss provisioning standard, CECL, is intended to promote proactive provisioning as loan loss reserves can be conditioned on expectations of the economic cycle. We study the degree to which one modeling decisionexpectations about the path of future house prices-affects the size and timing of provisions for first-lien residential mortgage portfolios. While we find that provisions are generally less pro-cyclical compared to the current incurred loss standard, CECL may complicate the comparability of provisions across banks and time. Market participants will need to disentangle the degree to which variation in provisions across firms is driven by underlying risk versus differences in modeling assumptions.

When houses are sold they come with a deed attached that spells out the legal guarantees on good title. Some deeds give clues about the characteristics of the seller or the house. Using a 37,043-observation house price hedonic with a Bayesian spatial error model, we find the type of deed attached to a housing sale can have a dramatic correlation with the sale price. Ten deed types command a discount, and one commands a premium relative to warranty deeds. Mortgage rates for sheriff's deeds and foreclosure deeds are lower than for warranty deeds, indicating more sophisticated buyers. Copyright 2008 American Real Estate and Urban Economics Association