CMBS Special Purpose Entities

Why CMBS Risk Retention Rules Are Reducing The Amount of Conduit Lenders

Why CMBS Risk Retention Rules Are Reducing The Amount of Conduit Lenders

While conduit loan issuances have risen steeply in the last few years, the amount of lenders has actually fallen slightly— and experts believe that’s a direct result of a new federal risk retention rule that took effect in Dec. 2016. Before the market crash of 2008, the CMBS market was incredibly hot, and lenders were quite liberal with who they provided loans to— especially because they knew they could transfer 100% of the risk to CMBS bondholders.

Special Purpose Entities in Relation to CMBS Loans

Special Purpose Entities in Relation to CMBS Loans

If you’re considering taking out a CMBS loan for a commercial property, your lender will typically require you to form a special purpose entity, or SPE, that will own the property and will act as the legal borrowing entity. Specifically, the borrower must form a single-purpose, bankruptcy-remote SPE, a special purpose entity that is specifically designed to hold one asset and to prevent that asset from being involved in external bankruptcy proceedings.