From Origination to Renegotiation: A Comparison
of Portfolio and Securitized Commercial Real
Published online: 11 February 2016
Springer Science+Business Media New York (outside the USA) 2016
Abstract We use a unique loan-level dataset to compare portfolio and securitized
commercial real estate loans. The paper documents how the types of loans banks
choose to hold in their portfolios differ substantially from the types of loans the same
banks securitize. Banks tend to hold loans that are Bnon-standard^ in some observable
dimension. These loans are riskier and more likely to become delinquent or distressed.
Conditional on default, we find that banks are significantly more likely to extend
portfolio loans than is the case for securitized loans. Our results suggest that banks
have a comparative advantage in funding risky assets with contracts that may require
flexibility in the event of distress.
JEL Classification G14
J Real Estate Finan Econ (2017) 55:1–31
The views expressed are not necessarily those of the Board of Governors of the Federal Reserve System or the
Federal Reserve Bank of San Francisco.
* Joseph Nichols
Driehaus College of Business, DePaul University, 1 E. Jackson Blvd, Chicago, IL 60604, USA
Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco, CA 94120, USA
Board of Governors of the Federal Reserve System, 20th and C Str. NW, Washington,
D.C. 20551, USA