CMBS loans, also referred to as conduit loans, are one of the most popular ways to finance commercial real estate in the United States. They are offered for almost all types of income-producing commercial properties, such as office buildings, shopping centers, apartment buildings, and hotels. When compared to other types of commercial property loans, CMBS loans have a variety of advantages and disadvantages. In this CMBS primer, we’ll discuss the differences between conduit loans and other types of commercial financing, and tell borrowers exactly what they need to know before deciding to take on CMBS debt.
CMBS loan origination is the process in which a conduit lender analyzes a borrower’s commercial loan application, determines their suitability for financing, presents the terms to the borrower, and, if both parties agree, issues funds. In contrast to bank loans, the CMBS origination process can be somewhat complex, as each loan must meet specific credit standards in order to be securitized. In this process, a conduit loans are pooled with other loans and sold to investors as commercial mortgage backed securities.