Journal of Banking & Finance Vol. 154 2023
Banks, non-banks, and the incorporation of local information in CMBS loan pricing
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.
- DOI
- 10.1016/j.jbankfin.2023.106918
- Volume
- 154
- Pages
- 106918
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib