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Last updated on Nov 25, 2022
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What are CMBS Tranches?

Just like asset backed securities and mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) are divided into tranches based on credit risk. The highest-rated, least risky loans will be placed in the highest tranches, while the lowest-rated, riskiest loans will be placed in the lowest tranches.

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In this article:
  1. CMBS are Split Into Tranches Based on Credit Risk
  2. To learn more about CMBS loans, fill out the form below to speak to a conduit loan expert today!
  3. Get Financing

CMBS are Split Into Tranches Based on Credit Risk

Just like asset backed securities and mortgage backed securities (MBS), commercial mortgage backed securities (CMBS) are divided into tranches based on credit risk. The highest-rated, least risky loans will be placed in the highest tranches, while the lowest-rated, riskiest loans will be placed in the lowest tranches. Higher tranches will generally offer interest rates (and lower returns for investors), while lower tranches offer higher interest rates (and higher potential returns for investors). Investors should understand, however, that, in the case of a default on one or more loans in a commercial mortgage backed security, the highest tranches must be fully paid off, with interest, before the lower tranches will receive any funds.

To learn more about CMBS loans, fill out the form below to speak to a conduit loan expert today!

In this article:
  1. CMBS are Split Into Tranches Based on Credit Risk
  2. To learn more about CMBS loans, fill out the form below to speak to a conduit loan expert today!
  3. Get Financing
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