CMBS Loan: CMBS stands for Commercial Mortgage Backed Securities. As the initialism implies, the CMBS loans are securitized by the corresponding commercial real estates that are mortgaged. The securities are then pooled and traded on the secondary market providing liquidity for investors enhancing buy and sell more efficiently compared to that of individual loans. The term CMBS loan is also interchangeably used with the Conduit Loan since an organization such as a trust or a financial institution acts as the conduit to facilitate and arrange for the servicing of the subject loan.
Borrowers Benefits: CMBS loans offer more attractive rates with longer fixed-rate terms. Also, they are usually non-recourse and assumable providing more value and marketability to the corresponding real estate.
Limitations: Most CMBS lenders require large multi-million dollar loans. The subject property has to be stable with dependable long-term income stream; and if needed, it must have in place a reliable and professional property management. The loan process normally involves engaging various professionals/reports and a legal counsel. In some complex cases the loan closing costs can be much higher than a traditional loan. A CMBS loan generally has a Yield Maintenance fee or Defeasance cost if it is prepaid before the loan maturity date.
Loan Placement: A mortgage broker that handles a CMBS loan must be well seasoned in the subject industry area. He/she should have sufficient understating of the special underwritings involved, requirements and be capable of assisting borrowers with needed tedious documentations and helping them navigate through the transaction.
Closing Process: Aside from being a mortgage consultant, the mortgage broker acts as the intermediary between the borrowers and the CMBS lenders. His/her office is generally the hub for the communications and coordination to facilitate terms negotiation and securing a successful, timely and smooth closing.
Overall, despite its complexity, there are lots of benefits in obtaining CMBS loans for the right situations. It is the job of a sophisticated mortgage consultant to evaluate and size the transaction in order to make the appropriate recommendations.
Bankers Unlimited Mortgage has successfully brokered CMBS loans since the inception of such financing in the early 1990’s.
