In one sentence
Pooling loans and issuing securities backed by their cash flows, distributing risk to capital-markets investors.
The longer version
Securitization converts illiquid loans into tradable bonds, spreading risk and freeing lender capital to lend again. CMBS is the commercial real estate version; agency securities are another.
Loans destined for securitization are underwritten and documented to the pool's standards, which shapes their closing files.
Common questions
- What is securitization in commercial real estate?
- Pooling commercial mortgage loans and issuing bonds backed by their cash flows, transferring credit risk to investors in different classes.
- Why do lenders securitize loans?
- To recycle capital into new lending, earn origination and sale income, and move credit risk off their balance sheets.
- How does securitization affect the borrower?
- Terms are standardized, prepayment is usually limited to defeasance or yield maintenance, and later requests go through servicers rather than the original lender.
Keep reading
- Loan participations: a working guideLead and participant, document flow, ongoing obligations.
- The due diligence checklist, built to be runChecklists as systems, not documents.
- How life companies run commercial mortgage operationsThe long servicing tail.
- Commercial loan softwareWhere this sits in the lending stack.