Conduit Loans vs. Fusion CMBS

Fusion CMBS Loans Combine Smaller and Larger Conduit Loans During Securitization

Unlike traditional conduit loans, fusion CMBS transactions combine a large amount of smaller CMBS loans with bigger, investment grade loans during the securitization process. This is designed to reduce overall risks for lenders, as larger loan borrowers are much less likely to default. For example, a fusion CMBS transaction might have 50 smaller loans of $5-15 million each, combined with a large loan of $100 million or more. In contrast, a traditional CMBS securitization might involve around 100 smaller loans, each which would make up no more than 5% of the entire securitization amount.

In general, the trend toward fusion CMBS loans is more of concern to CMBS investors, rather than borrowers. However, fusion CMBS lending does make it somewhat easier for borrowers to acquire extremely large CMBS loans, which could make it a positive for large companies whom wish to use conduit financing for commercial real estate.

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