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.
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.