Comparing Securitized and Balance Sheet Loans: Size Matters
Andra C. Ghent
Arizona State University (ASU) - Finance Department
Rossen I. Valkanov
University of California, San Diego (UCSD) - Rady School of Management
October 15, 2013
Do securitized loans differ from loans held on lenders' balance sheets? If so, why? To investigate these questions, we assemble a unique dataset of commercial mortgages with information on loan characteristics at origination and subsequent performance. The most significant difference between securitized (CMBS) and balance sheet loans is the size of the loan. The loans in the highest loan size decile have a 43% percent chance of securitization whereas the ones in the lowest decile have only a 1% chance. This result is consistent with diversification being a key motivation for securitization. We also find that loans that require substantial monitoring are less likely to be securitized. Although securitized loans are not riskier after controlling for observable characteristics, they get resolved less quickly after defaulting.
Number of Pages in PDF File: 52
Keywords: Securitization, Commercial Mortgage-Backed Securities (CMBS), Structured finance
JEL Classification: G21, G23, G20working papers series
Date posted: September 27, 2012 ; Last revised: October 16, 2013
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