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


Self-dealing is potentially important but difficult to measure. I study special servicers in commercial mortgage-backed securities (CMBS), who sell distressed assets on behalf of bondholders. Around 2010, ownership changes for four major servicers raised tunneling 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 point, $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. ∗I am grateful to Fernando Ferreira, Joe Gyourko, and Todd Sinai for their advice. I thank Santosh Anagol, Effi Benmelech, Serdar Dinc, Mark Garmaise, Kristopher Gerardi, Laurie Goodman, Jean-Francois Houde, Pamela Lee, Christopher Palmer, Sergey Tsyplakov, Nikolai Roussanov, seminar participants at Penn State University, University of Virginia, Wharton, and conference participants at the AREUEA-ASSA annual conference, Housing-Urban-LaborMacro (HULM), NBER Summer Institute, WFA Summer Real Estate Research Symposium, and the University of Southern California Research Symposium. Rachel Brill, Ying Chen, Hye Jin Lee, Jeremy Kirk, Will Lin, Laura Nugent, Joon Yup Park, Rebecca Pierson, Xuequan Peng, Dean Udom, Xin Wan, and Justine Wang were excellent research assistants. I am also grateful to market participants who shared their experiences with me in confidence. I thank the Research Sponsors Program of the Zell/Lurie Real Estate Center at Wharton, the Jacobs Levy Grant, and the Wharton Dean’s Research Fund for research support. All errors are my own. †Wharton Real Estate. 3620 Locust Walk, 1464 SHDH, Philadelphia, PA 19104-6302. Email:

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@inproceedings{Wong2016CMBSAC, title={CMBS and Conflicts of Interest: Evidence from Ownership Changes for Servicers∗}, author={Maisy Wong and Kristopher S. Gerardi and Laurie Goodman and Jean-François Houde and Pamela Lee and Christopher Palmer and Ying Chen and Hye Jin Lee and Jeremy M. W. Kirk and Will Y. Lin and Laura Nugent and Joon Yup Park and Rebecca Pierson and Xuequan Peng}, year={2016} }