Delinquencies, Default and Borrowers' Strategic Behavior toward the Modification of Commercial Mortgages

Stephen L. Buschbom, James B. Kau, Donald C. Keenan, Constantine Lyubimov

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

This article constructs a model of mortgage delinquency which tests the extent to which borrowers anticipate a loan modification resulting from such a delinquency. Using a sample of modified loans from commercial mortgage-backed securities (CMBS), we estimate the present value of modified cash flows and project modification benefits each month for all CMBS loans which serve to proxy for a borrower's anticipation of a beneficial modification. Our results confirm a borrower's anticipation of a modification increases the delinquency hazard, and supports the theory that borrower delinquency is strategically endogenous.

Original languageEnglish
Pages (from-to)936-967
Number of pages32
JournalReal Estate Economics
Volume49
Issue number3
DOIs
StatePublished - Sep 1 2021

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