From Origination to Renegotiation: A Comparison of Portfolio and Securitized Commercial Real Estate Loans

Lamont Black (), John Krainer and Joseph Nichols ()
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Lamont Black: DePaul University
Joseph Nichols: Board of Governors of the Federal Reserve System

The Journal of Real Estate Finance and Economics, 2017, vol. 55, issue 1, No 1, 31 pages

Abstract: Abstract We use a unique loan-level dataset to compare portfolio and securitized commercial real estate loans. The paper documents how the types of loans banks choose to hold in their portfolios differ substantially from the types of loans the same banks securitize. Banks tend to hold loans that are “non-standard” in some observable dimension. These loans are riskier and more likely to become delinquent or distressed. Conditional on default, we find that banks are significantly more likely to extend portfolio loans than is the case for securitized loans. Our results suggest that banks have a comparative advantage in funding risky assets with contracts that may require flexibility in the event of distress.

Keywords: Securitization; CMBS; Commercial banks; Asymmetric information; Renegotiation (search for similar items in EconPapers)
JEL-codes: D82 G14 G21 G33 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (21)

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DOI: 10.1007/s11146-016-9548-1

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