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CMBS and Conflicts of Interest: Evidence from Ownership Changes for Servicers

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  • MAISY WONG

Abstract

Self‐dealing is potentially important but difficult to measure. In this paper, I study special servicers in commercial mortgage‐backed securities (CMBS), which sell distressed assets on behalf of bondholders. Around 2010, ownership changes of four major servicers raised concerns that they may direct benefits to new owners' affiliates (buyers and service providers). Loans liquidated after ownership changes have greater loss rates than before (8 percentage points (p.p.), $2.3 billion in losses), relative to other (placebo) servicers. Together with a case study that tracks self‐dealing purchases, the findings point to potential steering conflicts that could incentivize tunneling through fees to service providers.

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  • Maisy Wong, 2018. "CMBS and Conflicts of Interest: Evidence from Ownership Changes for Servicers," Journal of Finance, American Finance Association, vol. 73(5), pages 2425-2458, October.
    • Handle: RePEc:bla:jfinan:v:73:y:2018:i:5:p:2425-2458
    DOI: 10.1111/jofi.12690
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    Cited by:

    1. Andreas Fuster & David Lucca & James Vickery, 2023. "Mortgage-backed securities," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 15, pages 331-357, Edward Elgar Publishing.
    2. Aiello, Darren J., 2022. "Financially constrained mortgage servicers," Journal of Financial Economics, Elsevier, vol. 144(2), pages 590-610.
    3. Xudong An & Lawrence R. Cordell & Nicholas Smith, 2023. "CMBS Market Evolution and Emerging Risks," Working Papers 23-27, Federal Reserve Bank of Philadelphia.
    4. Luis Arturo Lopez, 2021. "Asymmetric information and personal affiliations in brokered housing transactions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 459-492, June.
    5. Walter D'Lima & Luis Arturo Lopez, 2021. "Trustee affiliation and servicer oversight: Evidence from CMBS markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(3), pages 699-732, September.

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