2005
Abstract:
This study analyzes the impact of contemporaneous loan stress on the termination of
loans in the commercial mortgage-backed securities pool using a novel measure, based
on changes in net operating incomes and property values at the MSA-property type-year
level. Employing a semi-parametric competing risks model for a variety of
specifications, we find that the probability of default is extremely low even at very high
levels of stress, even though the point estimates of greatest interest are very statistically
significant. These results suggest substantial lender forbearance and a possible
reluctance to foreclose, and are consistent with previous literature measuring/modeling
the incidence of default where such option is "in the money".
