Banks, Non-Banks, and the Incorporation of Local Information in CMBS Loan Pricing

56 Pages Posted: 7 Nov 2019 Last revised: 24 Feb 2021

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: October 1, 2020

Abstract

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. The difference in loan spread when bank-borrower distance increases from zero to the median of about 900 miles is 17 basis points, and this effect is more pronounced if the loan is collateralized by a riskier property. On the contrary, geographical distance does not seem to have any effect on the loan spread of mortgages granted by non-bank lenders. Moreover, loans granted to distant borrowers by both bank and non-bank lenders are more likely to default. Our results contribute to the emerging literature on non-bank lender behavior.

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, Banks, Non-Banks, and the Incorporation of Local Information in CMBS Loan Pricing (October 1, 2020). Swiss Finance Institute Research Paper No. 19-58, Available at SSRN: https://ssrn.com/abstract=3481034 or http://dx.doi.org/10.2139/ssrn.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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