Working Paper
Recourse as Shadow Equity: Evidence from Commercial Real Estate Loans
Glancy, David P.; Nichols, Joseph B.; Kurtzman, Robert J.; Loewenstein, Lara (2021-09-27)
We study the role that recourse plays in the commercial real estate loan contracts of the largest U.S. banks. We find that recourse is valued by lenders and is treated as a substitute for conventional equity. At origination, recourse loans have rate spreads that are at least 20 basis points lower and loan-to-value ratios that are around 3 percentage points higher than non-recourse loans. Dynamically, recourse affects loan modification negotiations by providing additional bargaining power to the lender. Recourse loans were half as likely to receive accommodation during the COVID-19 pandemic, ...
Working Papers , Paper 21-20

Working Paper
Recourse as Shadow Equity: Evidence from Commercial Real Estate Loans
Glancy, David P.; Kurtzman, Robert J.; Loewenstein, Lara; Nichols, Joseph B. (2021-12-17)
We study the role that recourse plays in the commercial real estate loan contracts of the largest U.S. banks. We find that recourse is valued by lenders and is treated as a substitute for conventional equity. At origination, recourse loans have rate spreads that are at least 20 basis points lower and loan-to-value ratios that are around 3 percentage points higher than non-recourse loans. Dynamically, recourse affects loan modification negotiations by providing additional bargaining power to the lender. Recourse loans were half as likely to receive accommodation during the COVID-19 pandemic, ...
Finance and Economics Discussion Series , Paper 2021-079