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Commercial Banks and Real Estate Lending: The Texas Experience

Author

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  • Rebel A. Cole
  • Robert A. Eisenbeis
  • Paul M. Horvitz

Abstract

This study analyzes the performance of Texas commercial banks specializing in mortgage lending during the late 1980s and early 1990s to investigate how representative was their experience as compared with that of banks across the country concentrating in real estate lending. The results show that Texas real estate banks (REBs) performed very poorly during the 1980s and early 1990s, but this was because the Texas REBs were clearly different from the majority of the banks classified as REBs in the rest of the country. Texas REBs invested more heavily in commercial mortgages than did other banks. In a poor real estate market, these loans performed very poorly. The analysis indicates that the Texas experience is not a basis for rejecting the view that the commercial banking industry can safely replace the declining thrift industry as a major source of residential mortgage financing.

Suggested Citation

  • Rebel A. Cole & Robert A. Eisenbeis & Paul M. Horvitz, "undated". "Commercial Banks and Real Estate Lending: The Texas Experience," Finance and Economics Discussion Series 1996-15, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    • Handle: RePEc:fip:fedgfe:1996-15
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    File URL: http://www.federalreserve.gov/pubs/feds/1996/199615/199615pap.pdf
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    References listed on IDEAS

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    1. Robert A. Eisenbeis & Myron L. Kwast, 1989. "Are real estate specializing depositories viable? The evidence from commercial banks," Finance and Economics Discussion Series 88, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Blasko, Matej & Sinkey, Joseph Jr., 2006. "Bank asset structure, real-estate lending, and risk-taking," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(1), pages 53-81, February.
    2. Lucia Gibilaro & Gianluca Mattarocci, 2016. "Are Real Estate Banks More Affected by Real Estate Market Dynamics?," International Real Estate Review, Global Social Science Institute, vol. 19(2), pages 151-170.

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