Abstract
This paper develops an equilibrium model of the commercial mortgage market that includes the sequence from commitment to origination and allows testing for differences by type of lender. From borrowers, loan demand is based on the income yield, capital gains, and expectations about return distributions. Lenders use prices such as mortgage rates and their distributions, and quantities in underwriting standards. There are separate equilibria in the markets for loan commitments and originations. Bank and nonbank lenders are not restricted to the same lending technology, nor to the weights placed on mortgage rates as opposed to underwriting standards. Empirical results for the United States commercial mortgage market indicate that banks use interest rates in allocating credit while nonbanks rely on underwriting standards, notably the loan-to-value ratio. A consequence is that nonbanks have a clientele incentive towards making low cap rate loans compensated by low loan-to-value ratios.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 81-94 |
| Number of pages | 14 |
| Journal | Journal of Real Estate Finance and Economics |
| Volume | 26 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 1 2003 |
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All Science Journal Classification (ASJC) codes
- Accounting
- Finance
- Economics and Econometrics
- Urban Studies
Cite this
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Bank and Nonbank Lenders and the Commercial Mortgage Market. / Ambrose, Brent William; Benjamin, John D.; Chiniloy, Peter.
In: Journal of Real Estate Finance and Economics, Vol. 26, No. 1, 01.01.2003, p. 81-94.Research output: Contribution to journal › Article
TY - JOUR
T1 - Bank and Nonbank Lenders and the Commercial Mortgage Market
AU - Ambrose, Brent William
AU - Benjamin, John D.
AU - Chiniloy, Peter
PY - 2003/1/1
Y1 - 2003/1/1
N2 - This paper develops an equilibrium model of the commercial mortgage market that includes the sequence from commitment to origination and allows testing for differences by type of lender. From borrowers, loan demand is based on the income yield, capital gains, and expectations about return distributions. Lenders use prices such as mortgage rates and their distributions, and quantities in underwriting standards. There are separate equilibria in the markets for loan commitments and originations. Bank and nonbank lenders are not restricted to the same lending technology, nor to the weights placed on mortgage rates as opposed to underwriting standards. Empirical results for the United States commercial mortgage market indicate that banks use interest rates in allocating credit while nonbanks rely on underwriting standards, notably the loan-to-value ratio. A consequence is that nonbanks have a clientele incentive towards making low cap rate loans compensated by low loan-to-value ratios.
AB - This paper develops an equilibrium model of the commercial mortgage market that includes the sequence from commitment to origination and allows testing for differences by type of lender. From borrowers, loan demand is based on the income yield, capital gains, and expectations about return distributions. Lenders use prices such as mortgage rates and their distributions, and quantities in underwriting standards. There are separate equilibria in the markets for loan commitments and originations. Bank and nonbank lenders are not restricted to the same lending technology, nor to the weights placed on mortgage rates as opposed to underwriting standards. Empirical results for the United States commercial mortgage market indicate that banks use interest rates in allocating credit while nonbanks rely on underwriting standards, notably the loan-to-value ratio. A consequence is that nonbanks have a clientele incentive towards making low cap rate loans compensated by low loan-to-value ratios.
UR - http://www.scopus.com/inward/record.url?scp=0037240966&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0037240966&partnerID=8YFLogxK
U2 - 10.1023/A:1021574215894
DO - 10.1023/A:1021574215894
M3 - Article
VL - 26
SP - 81
EP - 94
JO - Journal of Real Estate Finance and Economics
JF - Journal of Real Estate Finance and Economics
SN - 0895-5638
IS - 1
ER -