Local Traits and Securitized Commercial Mortgage Default

An, Xudong; Deng, Yongheng; Nichols, Joseph; Sanders, Anthony B.

doi:10.1007/s11146-013-9431-2

Cited by 14 publications

(16 citation statements)

References 26 publications

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“…When there was lock out, the refinance incentive was significant and positively related to default probability, which was also consistent with the literature (see, e.g ., An et al . ). Value per square foot was negative and significant, meaning buildings in better locations or of better quality were less likely to default.…”

Section: Resultsmentioning

confidence: 97%

“…This is consistent with findings in the existing literature (see, e.g ., An et al . ). The positive relation between lock out and prepayment penalty clauses could be due to similar reasons, where lenders required those clauses and higher interest rates on risky projects.…”

Section: Resultsmentioning

confidence: 97%

“…Several studies document the positive relationship between contemporaneous LTV and default risk (Vandell , Episcopos, Pericli and Hu , Goldberg and Capone , , An et al . , Chen and Deng ).…”

mentioning

confidence: 95%

“…For details on these control variables, please see An, Deng and Gabriel () and An, Deng, Nichols and Sanders ().…”

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confidence: 99%

“…As An et al . () pointed out, negative equity is a well‐established reason for mortgage default, making the contemporaneous LTV a natural risk factor. Several studies document the positive relationship between contemporaneous LTV and default risk (Vandell , Episcopos, Pericli and Hu , Goldberg and Capone , , An et al .…”

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confidence: 99%

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Green Buildings in Commercial Mortgage‐Backed Securities: The Effects of LEED and Energy Star Certification on Default Risk and Loan Terms

Pivo

2018

Real Estate Economics

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We study the impact of green building on loans in the CMBS market. A hazard model shows green buildings carry 34% less default risk, all else equal. A matched‐sample analysis gives similar results. We attribute the effect to a loan‐to‐value channel, where risk is lowered by a green price premium. The benefit comes at least partly from the level of green achievement, not only the label itself. Loans on buildings that were green at loan origination have slightly better terms than loans on nongreen buildings. That difference is growing over time, but the effect is economically small compared to default risk.

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Section: Resultsmentioning

confidence: 97%

Section: Resultsmentioning

confidence: 97%

mentioning

confidence: 95%

“…For details on these control variables, please see An, Deng and Gabriel () and An, Deng, Nichols and Sanders ().…”

mentioning

confidence: 99%

mentioning

confidence: 99%

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Green Buildings in Commercial Mortgage‐Backed Securities: The Effects of LEED and Energy Star Certification on Default Risk and Loan Terms

Pivo

2018

Real Estate Economics

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What is Subordination About? Credit Risk and Subordination Levels in Commercial Mortgage-backed Securities (CMBS)

Deng

Nichols

et al. 2014

J Real Estate Finan Econ

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Subordination is designed to provide credit risk protection for senior CMBS tranches by allocating the initial credit losses to the more junior tranches. Subordination level should in theory reflect the underlying credit risk of the CMBS pool. In this paper, we test the hypothesis that subordination is purely about credit risk as intended. We find a very weak relation between subordination levels and both the ex post and ex ante measures of credit risk, rejecting our null-hypothesis. Alternatively, we find that subordination levels were driven by non-credit risk factors, including supply and demand factors, deal complexity, issuer incentive and a general time trend. We conclude that contrary to the traditional view, the subordination level is not just a function of credit risk. Instead it also reflects the market need of a certain deal structure and is influenced by the balance of power among issuers, CRAs and investors.

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Cash Flow Performance of Fannie Mae Multifamily Real Estate: Evidence from Repeated NOI and EGI Indices

Fisher²,

Geltner³

2015

J Real Estate Finan Econ

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Using a unique dataset of building operating statements from Fannie Mae, we develop repeated measures regression (RMR) indices for NOI, EGI and PGI to track the cash flow performance of Fannie Maefinanced multifamily real estate. Our three-stage RMR estimate shows an average NOI growth of about 1.8% during 1993-2011, which is lower than inflation rate and significantly lower than what is usually perceived by investors. Based on the RMR estimates, we find that the whole portfolio of Fannie Mae multifamily properties outperforms NCREIF multifamily properties in NOI growth, especially during the 2000-2001 recession and the Great Recession, which helps explain the superior performance of Fannie Mae multifamily mortgage loans during the recent crisis. In the cross section, multifamily properties in supply-constrained areas have substantially larger NOI growth. Workforce housing performs better than low-income housing even after we control for locational differences and property features. We do not find a size effect in NOI growth once we control for supply constraints. We also find EGI growth to be much less volatile than NOI growth, which implies that changes in operating expenses are the main driving factor of the cyclicality of NOI. Operating expenses also tend to be pro-cyclicalthey grow faster during recessions. EGI growth (decline) leads PGI growth (decline), which supports the stock-flow model of rental adjustment where vacancy changes before rent. From a methodological perspective, we find that the conventional methods such as simple average and weighted average overestimate multifamily NOI growth, likely due to significant sample selection bias and outlier influence. In contrast, the RMR indices control for changes in property quality and are much more robust in the presence of data errors and outliers.

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Local Traits and Securitized Commercial Mortgage Default

Cited by 14 publications

References 26 publications

Green Buildings in Commercial Mortgage‐Backed Securities: The Effects of LEED and Energy Star Certification on Default Risk and Loan Terms

Green Buildings in Commercial Mortgage‐Backed Securities: The Effects of LEED and Energy Star Certification on Default Risk and Loan Terms

What is Subordination About? Credit Risk and Subordination Levels in Commercial Mortgage-backed Securities (CMBS)

Cash Flow Performance of Fannie Mae Multifamily Real Estate: Evidence from Repeated NOI and EGI Indices

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