INTRODUCTION THIS ARTICLE DESCRIBES A RESEARCH/CONSULTING PROJECT conducted in 2008-09 on the residential mortgage lending process in Italian banks. The focus is on the methods and the procedures implemented by Italian banks in valuing real estate used as collateral for loans both in the loan origination and in the credit monitoring process. The project was carried out under the auspices of the University of Macerata, which has a strong program in banking and real estate finance. Impetus for the study resulted from the disastrous results of the holdings of mortgages and mortgage derivatives in United States banks. The question naturally arose as to whether or not these same risk factors, or others, could be at work in Italian banks, which hold an even greater percentage of their assets in residential mortgage loans--about 24.4 percent in 2008 compared with about 19.1 percent in U.S. banks. Smaller and medium-size Italian banks hold an even greater proportion of their assets (about 30 percent) in these loans.