Distance Effects in CMBS Loan Pricing: Banks versus Non-Banks

47 Pages Posted: 7 Nov 2019

See all articles by Piet Eichholtz

Piet Eichholtz

Maastricht University

Nagihan Mimiroglu

Maastricht University

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Erkan Yönder

John Molson School of Business, Concordia University

Date Written: November 4, 2019

Abstract

The composition of lenders has changed dramatically since the crisis, and non-bank lenders have become important players in the commercial mortgage-backed securities (CMBS) markets. Comparing banks to non-bank lenders, we investigate whether the geographical distance between lenders, borrowers and their properties is reflected in the pricing of US mortgages that were included in US CMBS pools during the 2000 to 2017 period. We find that a doubling in bank borrower distance is associated with a 2.5 basis point increase in the spread, and that this effect is more pronounced if the loan is collateralized by a riskier property. Geographical distance does not seem to have any effect on the loan spread for mortgages granted by non-bank lenders. The difference in loan pricing across originator types (even after controlling for key mortgage and property characteristics) suggests banks and non-bank lenders have different incentives, lending technologies, and/or different types of borrowers.

Keywords: CMBS, non-bank lending, geographical distance, asymmetric information, loan spread

JEL Classification: G21, G32

Suggested Citation

Eichholtz, Piet and Mimiroglu, Nagihan and Ongena, Steven R. G. and Yönder, Erkan, Distance Effects in CMBS Loan Pricing: Banks versus Non-Banks (November 4, 2019). Swiss Finance Institute Research Paper No. 19-58. Available at SSRN: https://ssrn.com/abstract=3481034

Piet Eichholtz

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Nagihan Mimiroglu

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Erkan Yönder

John Molson School of Business, Concordia University ( email )

Montreal
Canada

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