Loan-to-value ratio, or LTV, is one of the most important metrics that lenders use to determine whether a borrower can qualify for CMBS loan. LTV can be determined by dividing the amount of the loan by the assessed value of the property.
CMBS Loans, Conduit Loans
A pooling and servicing agreement (PSA), is a contract that is required when loans, including CMBS loans, are pooled together and packaged into mortgage backed securities. For CMBS loan borrowers, this means that they must abide by both the terms of the loan agreement, and by the terms of their loan’s pooling and servicing agreement.
CMBS Loans, Conduit Loans
A real estate investment trust (REIT) is a firm that acquires, owns, and operates income-producing commercial real estate, or, in the case of mortgage REITs, commercial mortgages. REITs may be either publicly traded or non-traded, private REITs, depending on the individual company. CMBS loans and REITs have a complex relationship; on one hand, traditional REITs use CMBS loans to finance their property investments, while certain mortgage REITs originate or purchase commercial loans in order to generate profits for investors.
CMBS Loans, Conduit Loans
An exchange-traded fund (ETF) is a fund comprised of securities that is regularly traded on major stock exchanges. CMBS ETFs are exchange-traded funds composed of commercial mortgage backed securities (CMBS). A commercial mortgage backed security generally consists of a pool of loans issued to income-producing commercial properties, such as apartment buildings, shopping centers, and hotels, that is placed in a trust, securitized, and sold to investors on the secondary market. Right now, the concept of CMBS ETFs is relatively new, so only one CMBS ETF is currently being actively traded, the iShares CMBS ETF.
CMBS Loans, Conduit Loans
A pooling and servicing agreement (PSA), is a contract that is required when loans, including CMBS loans, are pooled together and packaged into mortgage backed securities. For CMBS loan borrowers, this means that they must abide by both the terms of the loan agreement, and by the terms of their loan’s pooling and servicing agreement.
CMBS Loans, Conduit Loans
While CMBS lenders’ underwriting standards are stricter than they once were, a certain amount of conduit loan borrowers still default on their loans. It’s generally understood that a loan default is something that borrowers want to avoid at all costs. However, understanding the CMBS default rates-- and, just as importantly, the reason why borrowers defaulted on their loans in the first place, can be essential for borrowers who want to avoid the same fate.
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