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

51 Pages Posted: 7 Nov 2019 Last revised: 7 Jun 2022

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; NTNU Business School; 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 commercial mortgage-backed security (CMBS) pools during the 2000 to 2017 period. The difference in loan spreads when the bank-borrower distance increases from zero to the median of about 700 miles is 10 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. The difference in loan pricing across originator types (even after controlling for key mortgage and property characteristics) suggests that banks and non-bank lenders have different incentives, lending technologies, and/or different types of borrowers. 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, Limburg 6200MD
Netherlands

Nagihan Mimiroglu

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 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

NTNU Business School ( email )

Norway

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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