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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Piet Eichholtz & NAGIHAN MIMIROGLU & Steven Ongena & Erkan Yönder, 2019. "Distance Effects in CMBS Loan Pricing: Banks versus Non-Banks," Swiss Finance Institute Research Paper Series 19-58, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1958
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    Cited by:

    1. Christoph Basten & Steven Ongena, 2019. "The Geography of Mortgage Lending in Times of FinTech," Swiss Finance Institute Research Paper Series 19-39, Swiss Finance Institute.

    More about this item

    Keywords

    CMBS; non-bank lending; geographical distance; asymmetric information; loan spread.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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