Abstract
This paper extends what we know about loss given default (LGD) by examining a newly available dataset on commercial real estate (CRE) loan losses. These data come from 295 failed banks resolved by the FDIC using loss-share agreements between 2008 and 2013. We examine over 14,000 distressed CRE loans to study the relationship between LGD and loan size, workout period, loan seasoning, asset price changes over the life of the loan, and other factors related to losses. We also examine the relationship between LGD and certain bank characteristics. The results inform commercial lenders and regulators about the factors that influence losses on defaulted loans during periods of distress.
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