Complexity and loan performance: Evidence from the securitization of commercial mortgages

Craig H. Furfine*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

25 Scopus citations


Between 2001 and 2007, the complexity of commercial mortgage-backed securities (CMBS) increased substantially. The median size of commercial mortgage loan pools tripled and the median number of AAA-rated tranches doubled. I examine whether deal complexity is related to loan performance by analyzing a sample of approximately 40,000 commercial mortgage loans from 334 CMBS deals. I find that loan performance is worse for loans in more complex securitizations. However, neither the price of a deal's securities nor a deal's risk retention reflected that complexity correlates with lower loan quality. These findings present a challenge for theories of optimal security design.

Original languageEnglish (US)
Pages (from-to)154-187
Number of pages34
JournalReview of Corporate Finance Studies
Issue number2
StatePublished - Mar 1 2014

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Business and International Management


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