What does a CMBS do?

Commercial mortgage-backed securities (CMBS) are fixed-income investment products that are backed by mortgages on commercial properties rather than residential real estate. CMBS can provide liquidity to real estate investors and commercial lenders alike.

What is a CMBS model?

OVERVIEW. The BlackRock Solutions (“BRS”) CMBS Modeling framework is a comprehensive analysis, reporting, and. surveillance framework for Non-Agency US Commercial Mortgage Backed Security (“CMBS”) transactions secured by Commercial Real Estate (“CRE”) assets. Freddie Mac K deals are also covered by framework.

How do CMBS make money?

Here’s how it works. CMBS lenders are essentially wholesalers, benefitting from what the retail industry would call a bulk discount. They originate loans at a certain interest rate, then sell them later at a different interest rate thanks to the bulk package they provide through their bonds.

Are CMBS safe?

However, it’s important to understand that CMBS financing occupies an incredibly useful niche in the industry— providing a reliable source of low interest rate financing to borrowers who otherwise might not qualify. However, CMBS loans do have risks, like tough prepayment penalties, which borrowers should keep in mind.

How long is a CMBS loan?

CMBS (Conduit) Loans typically have terms of 5, 7, or 10 years (with 15 years as a rare exception) and 25-30 year amortizations. Part or all of the term may be interest-only depending on market conditions.

What is the significant difference between CMBS financing and traditional bank financing?

Since the CMBS loan will be collateralized, the terms and structure are more complex than with a traditional loan, there is less flexibility to the borrower in negotiating the loan terms and CMBS loans are subject to a number of restrictions that may not be present with a traditional loan.

Can you pay off a CMBS loan early?

Negotiation of Prepayment Rights. Many borrowers believe CMBS loans can never be prepaid and must always be defeased. The reality is that prepayment can be negotiated at the time the CMBS loan is originally made, but the borrower can expect to pay for this flexibility in the form of a higher interest rate on the loan.