Comparing Securitized and Balance Sheet Loans: Size Matters

Abstract

We assemble a unique dataset of commercial mortgages with information on loan characteristics at origination and subsequent performance. The most significant difference between securitized 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. Finally, securitized loans get resolved less quickly after defaulting.

Keywords: Securitization, Commercial Mortgage-Backed Securities (CMBS), Structured finance

JEL Classification: G21, G23, G20