CMBS and Conflicts of Interest: Evidence from Ownership Changes for Servicers

Maisy Wong

Journal of Finance, 2018, vol. 73, issue 5, 2425-2458

Abstract: Self‐dealing is potentially important but difficult to measure. In this paper, I study special servicers in commercial mortgage‐backed securities (CMBS), which sell distressed assets on behalf of bondholders. Around 2010, ownership changes of four major servicers raised concerns that they may direct benefits to new owners' affiliates (buyers and service providers). Loans liquidated after ownership changes have greater loss rates than before (8 percentage points (p.p.), $2.3 billion in losses), relative to other (placebo) servicers. Together with a case study that tracks self‐dealing purchases, the findings point to potential steering conflicts that could incentivize tunneling through fees to service providers.

Date: 2018
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