In one sentence
Commercial mortgage-backed securities, bonds backed by pools of commercial real estate loans sold to capital-markets investors.
The longer version
CMBS aggregates commercial mortgages into securitized pools, funding loans through the bond market rather than a balance sheet. It offers borrowers non-recourse leverage with the tradeoff of rigid servicing and prepayment via defeasance.
CMBS loans carry standardized structures and servicing that borrowers and lenders template around, from origination through the servicing and eventual payoff.
Common questions
- What is CMBS?
- Commercial mortgage-backed securities: bonds backed by pools of commercial real estate loans, sold to capital markets investors in classes with different risk and return.
- How is a CMBS loan different from a bank loan?
- A CMBS loan is pooled and serviced under a pooling and servicing agreement, usually non-recourse with defeasance or yield maintenance, and less flexible to modify than a balance sheet loan.
- Who services a CMBS loan?
- A master servicer for performing loans and a special servicer for loans in default, under the pooling and servicing agreement.
Keep reading
- Loan participations: a working guideLead and participant, document flow, ongoing obligations.
- How life companies run commercial mortgage operationsThe long servicing tail.
- The due diligence checklist, built to be runChecklists as systems, not documents.
- Commercial loan softwareWhere this sits in the lending stack.