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The German banking sector has recently been facing high real estate loan default rates resulting in the accumulation of a high volume of distressed real estate debt in the banks' balance sheets. As a consequence, German banks are confronted with the workout of their non‐ and sub‐performing real estate loans to proactively solve the problem. When doing so, banks have to decide whether they want to conduct the loan workout in their own workout departments (integrative approach) or whether they prefer to outsource the workout to a third party servicer or even sell their bad loan exposure to an external investor (disintegrative approach). This paper aims to investigate this issue.

A bank's decision to employ an integrative or a disintegrative approach can be transferred into a make‐or buy‐decision as described by the transaction cost economics. The transaction between the bank and the workout manager is analysed by the transaction characteristics of the transaction cost economics. The specificity of the human capital required for the loan workout of real estate loans is a key consideration for answering the question of integration or disintegration. Assuming highly specific investments for both, the workout manager and the bank, a formal model compares the aggregated pay offs for the bank and the workout manager to determine the optimal control structure for the specific assets.

Following the assumptions of the transaction cost economics, the specificity of the investment of the workout manager (and also the bank) is crucial for the decision of integrating or disintegrating the workout of real estate loans. The degree of specificity required to perform the workout tasks depends on the status of underlying credit engagement and the characteristics of the collateral (the real estate). The formal analysis shows that the bank and the workout manager both under‐invest in integration and disintegration scenarios. However, if the degree of specificity of the investments is equal, nonintegration is superior to integration. Forward integration is superior to nonintegration, if the bank's investment is more specific than the workout manager's investment.

This research paper approaches the problematic from an academic stand point, integrating both the banking and the real estate perspective and aims to provide a recommendation for banks on the integration or disintegration of the workout unit for a certain real estate secured loan portfolio.

The purpose of this paper is to examine the impact of residential and commercial loans on total real estate sector loans by using partial least square–structured equation modelling (PL–SEM) method. The residential loans as a mediator have been used to know the mediation effect between commercial and total real estate loans of banks in India. The residential loans as a mediator govern the relationship between commercial loans and total real estate loans in India. Real estate sector development is a lucrative opportunity for India. The real estate sector plays a major role in shaping economic conditions of the individuals, firms and family.

The research is descriptive in nature. The study on residential loans, commercial loans and total real estate loans has been taken into consideration, and on the other hand the measurement and structural model have been employed to the study the impact of residential loans and commercial loans on total real estate loans in India by using PL–SEM. The residential loans as a mediator have been taken to study the mediation effect of the relationship between commercial loans and total real estate loans in India.

The outcome of the structural model that is bootstrapping technique shows that there is an impact of residential and commercial loans by public and private sector banks on total real estate sector development in India. The residential loans show the full mediation effect between commercial loans and total real estate loans as the value of variation accounted for (VAF) is more than 1.93 which shows residential loans govern the nature of variable between commercial loans and total real estate loans.

The public and private sector banks are contributing to the real estate sector development in India which increases the economic growth of the country. The mediation analysis shows that residential loans are an important aspect between commercial and total real estate loans in India as the demand for residential housing is more in India. The increasing role of banks in the real estate sector strengthens the financial capability in the real estate sector market, and the property buyers will able to purchase more property which leads to increasing demand for real estate sector.

The research paper is original, and PL–SEM has been used to find the results.

Using state-level data, the purpose of this paper is to examine state banking-industry specific as well as region economic determinants of real estate lending of commercial banks across all 51 states spanning the period 1966-2014.

Using both fixed-effects and dynamic-generalized method of moments (GMM) estimation techniques the study compares the sensitivity of different categories of real estate loans to regional banking and economic conditions. Finally, it provides a comparative perspective by comparing the results for real estate loans with other categories of loans given out by banks.

Greater capitalization, liquidity and overhead costs reduce real estate lending, while banks diversification and the size of the banking industry in each state increase such lending. Moreover, real estate loans are found to be procyclical to state economic cycles with a rise in state real gross domestic product (GDP) growth, increase in state housing price index (HPI) and decline in both inflation and unemployment rates, increasing real estate loans. Within disaggregated loan types, construction and land development and single-family residential loans are most responsive to state banking and economic conditions.

The recent financial turmoil is to a large extent attributable to excessive risk-taking by banks, particularly in terms of real estate lending. Hence, it is of paramount importance to empirically address the various determinants of real estate lending. With most banks restricting their operations in either one or a few states only, real estate lending in any given state may be more sensitive to regional banking and economic conditions than national aggregates. The present study is the first of its type to perform such an analysis.

Presents an investigation into the existence of information processing heuristics in two commercial bank lender types that provide investment and construction loans secured by real estate. Expert real estate banking lenders and expert private banking lenders evidenced different, systematic group specific heuristic usage. Heuristics constrained information cue relevancy and affected the lending decision. Expert private banking lenders mitigated real estate risk by using non‐collateral specific information cues. Real estate lending experts did not mitigate real estate market risk and required favourable collateral specific information cues in order to approve a loan. Concludes that access to credit for real estate investment may be limited by lender expertise because the development of expertise mandates restrictive task interpretation and cue relevance.

From January 2021, the potential flow of Chinese household non-mortgage loans, including business loans and short-term consumption loans to the residential real estate market, has attracted the attention of the regulatory authorities. This study aims to examine the effects of household non-mortgage loans on the Chinese residential real estate market.

Based on a monthly data set between July 2011 and December 2019, this study adopts a cointegration analysis.

This study finds that household non-mortgage loans do play a significant role in driving residential real estate prices in China.

While many studies have examined the Chinese real estate market and its linkage with the financial system and the economy, this study is the first of its kind in the academic literature that exclusively focusses on the role of non-mortgage loans in real estate prices, and makes an original contribution.

The paper seeks to focus on the causes of the recent subprime lending crisis in the US residential property market.

The paper reviews the present situation.

A number of causes for the crisis are shown, including the fragmented structure of the real estate settlement process, and the various people involved in real estate closings who operate under different regulatory and supervisory regimes with varying intensities of enforcement effort. This fragmentation makes it difficult to regulate the conduct of real estate industry insiders. Fragmented regulation also provides opportunities for swindlers, con‐artists, and fraudsters.

The paper makes a case for a meaningful regulatory reform, namely mandatory fraud reporting by all those involved in residential real estate closings and settlements.

The questions of loan availability and pricing were considered from the perspectives of financial economic theory and practice as well as a survey of lenders capable of financing a one-year bridge loan to determine the market's willingness to make such a loan and what rate of interest would be charged. Utilizing the sources above, in conjunction with professional knowledge and industry contacts, 101 lenders were selected as representative of the universe of lenders who had the capacity to make directly or otherwise to arrange, a $192 million bridge loan. The survey of lenders involved interviews with 67 of the 86 selected lenders from 59 firms. The paper aims to discuss these issues.

Loan availability and pricing were considered from perspectives of financial economic theory and practice plus a survey to determine market's willingness to make a loan at what price. Utilizing professional knowledge and industry contacts, 101 lenders were selected as representative of those which had the capacity to make a $192 million bridge loan. When lenders were evaluated against criteria of size, product type, geographic territory, and willingness/capability to provide nonstandard loans, list selected for telephone interviews was narrowed, then subsequently expanded with referrals that led to identification of new potential lenders to be contacted.

Nine lenders offered conceptualized deal structures to provide the required financing. Though the price may be expensive, especially relative to what borrowers may wish to pay, financing is available. Developers’ and deal-makers’ protestations that “it's impossible,” should be discounted and rejected. Because the subject property is characterized by high-risk, it is logical conclusion that the lenders expressing a desire to provide the bridge loan would expect to earn a high return, meaning that the interest rate would approach, if not exceed, 20 percent.

Because the nature of the research required that the specific identities of the building and the parties were not revealed, some lenders might decline to consider this financing opportunity. And, real world negotiation of financing terms could result in higher rates than quoted and/or disinclination of lenders to proceed. Because of very specialized circumstances surrounding this proprietary research, conducted subject to nondisclosure agreement, publication had to be deferred until those constraints no longer applied. Though the data are more than a decade old, this consideration does not compromise the relevance, validity, or generalizability of the findings.

Markets can accommodate transactions that might be perceived as improbable. Investors which approach opportunities with creativity and open mind, can make deals that would not be possible, were strict, rigid, unbending eligible deal preference parameters to be employed. Strategists establishing policies for real estate enterprises should insist on progressive, expansive thinking in turning the scope of their potential venture involvements. Real estate education and training should address more attention to financial economic theory, strategic initiative, and creative deal making, which priority topics are too seldom prioritized, with the consequence that too many in real estate think narrowly rather than expansively.

This research substantiates a fundamental theory of financial economics and refutes conventional applied wisdom. Seldom do researchers and investors have the opportunity to “get inside” the lending decision process for a large scale commercial property, especially one characterized by daunting circumstances and considerable complexity, such as studied here. A unique real world date set – not normally accessible to property scholars – enables study of the proposition that every commodity has a price, no matter how severe or difficult the circumstances, in a manner fully congruent with the new AACSB Business School Deans policy emphasis on relevance in addition to rigor.

As commercial mortgages much less studied than residential mortgages, this paper is significant addition to undeveloped segment of literature. As the majority of mortgage finance research, estimated to be in the range of 90 percent, has been limited to single family residential financing, the study of commercial mortgage financing is relatively under-researched. Further, the studies of commercial mortgage finance tend to be illustrative case studies with stylized facts rather than explorations of empiricism-based investigations. As most researchers engaged in exploring real estate topics limit themselves to public information, research that provides access to real world private transactions is especially important.

The authors examined the impact of the Market Facilitation Program (MFP) and Coronavirus Food Assistance Program (CFAP) payments to United States agricultural producers on non-real estate agricultural loans.

The authors used quarterly, state-level commercial bank data from 2016–2020 to estimate dynamic panel models.

The authors found MFP and CFAP payments not associated with the percentage of non-real estate agricultural loans with payments over 90 days late. However, these payments associated with the percentage of non-real estate agricultural loans with payments between 30 and 89 days late. The available data utilized cannot consider when producers received the actual payment and what they specifically did with those funds.

The contribution of this study is for US policymakers and agricultural lenders. The findings could be helpful in designing and implementing future ad hoc payment programs and provide an understanding of potential shortcomings of the current safety net for agricultural producers in the Farm Bill. Additionally, findings can assist agricultural lenders in predicting the impact of ad hoc payments on their distressed loan portfolios.

The purpose of this paper is to provide an indication of the returns to commercial property lending over the last 30 years in the UK.

There is no long-term index of the returns to commercial property lending in the UK. This paper provides a partial solution by simulating the performance of bullet loans of various vintages, based on the value movements of the IPD index.

On average over the long-term debt returns are higher than equity returns. However, in certain periods, the losses incurred by real estate lenders are very large.

No account taken of risk mitigation strategies used by lenders such as cross-collateralisation.

Provides an alternative approach to that recommended by the recent IPF “Vision For Real Estate Finance” Document based on the use of ICR. Makes the case for a loan equivalent of the IPD index.

Reduced chance of resource misallocation and recession due to excess real estate lending.

Very limited information on private real estate debt returns.