We study conflicting incentives of the master and special servicers in handling troubled loans in a CMBS deal and how the frictions between the interests of the two servicers might be diminished if the master and special servicing rights are held by the same firm. We show that concentrating both...

We expand on the standard commercial mortgage default model and create a new model by looking beyond the usual factors of option value, insolvency, property type, region, originator type, state foreclosure laws and macroeconomic measures. The new model incorporates measures of local economic...

We document the default rates of CMBS loans during the recent financial crisis. The 30 , 60 , and 90 day delinquency rates of conduit CMBS loans have risen sharply since late 2008 and have reached levels that are about 7 times of the 10-year average. Comparing to the previous crisis in the early...

Subordination is designed to provide credit risk protection for senior commercial mortgage-backed securities (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...

The Great Recession resulted in bank failures that exceeded the savings and loan (S&L) crisis in terms of percentage of institutions and the volume of assets of banks that failed. While much of the literature focuses “subprime” mortgages and its role in this financial crisis, we focus on the...