Conduit Loans

CMBS vs. RMBS: What You Need to Know

CMBS vs. RMBS: What You Need to Know

Mortgage backed securities (MBS) come in two main varieties; commercial mortgage backed securities (CMBS) and residential mortgage backed securities (RMBS). While CMBS are backed by large commercial loans, referred to as CMBS or conduit loans, RMBS are backed by residential mortgages, generally for single family homes. Residential mortgage backed securities may be backed by a variety of different kinds of residential loan products, such as home equity loans, as well as FHA loans.

CMBS Structure: What You Need to Know

CMBS Structure: What You Need to Know

A CMBS, or Commercial Mortgage Backed Security, consists of a group of commercial property loans that have been pooled together and securitized, in order to be sold to investors. These securities are broken into various layers, or tranches, each of which has a different level of credit quality, carries a different amount of risk, and offers a different return for investors.

CMBS News Updates: Spring 2019

CMBS News Updates: Spring 2019

In the first quarter of 2019, a variety of trends and events have impacted the state of CMBS and conduit financing in the United States. Looking back at the 2018 year, while overall commercial loan transaction volume was up, CMBS issuances fell approximately 12%, to just under $77 billion. Overall, CMBS delinquency rates rose slightly, and, experts believe that troubled retail properties, including shopping malls, may be in for additional trouble if they cannot find a lender willing to refinance their debt.

What is a CMBS B-Piece?

What is a CMBS B-Piece?

When CMBS loans are pooled together to create commercial mortgage backed securities, these securities vary in credit quality and payment priority. Typically, they are divided between investment grade securities, (AAA/Aaa through BBB-/Baa3) and sub-investment grade securities (BB+/Ba1 through B-/B3). While the A-class bondholders are paid first, B-piece bondholders must wait until all A-class bondholders are fully paid before they receive any compensation. Due to their higher risk, however, B-piece CMBS offer investors significantly higher returns when compared to A-rated CMBS.

CMBS Loans vs. Agency Loans for Multifamily Financing

CMBS Loans vs. Agency Loans for Multifamily Financing

When it comes to getting financing for a multifamily property, Fannie Mae and Freddie Mac multifamily loans, also known as agency loans, are some of the most popular options on the market. When compared with CMBS financing, these agency loans have a variety of similarities and differences. Both agency and CMBS are typically non-recourse and fully assumable, and offer highly competitive interest rates. However, agency loans usually offer even lower rates than CMBS, with rates starting at 3.75-3.9%.

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.

CMBS SASB: Single-Asset, Single-Borrower Conduit Loans

CMBS SASB: Single-Asset, Single-Borrower Conduit Loans

While the average CMBS, or commercial mortgage backed security, often consists of a pool of 50-100 loans, single-asset, single-borrower (SASB) conduit loans consist of one, large loan for a single property that is securitized and sold on the secondary market. These SASB loans are becoming an increasingly popular form of financing for the largest and most exclusive commercial properties.

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.