CMBS

CMBS loans are used to finance stabilized properties that a property owner intends to hold for a long time. CMBS is an acronym for Commercial Mortgage-Backed Securities. After a CMBS loan is closed, the loan originator contributes it to a pool of other loans that are then bundled together and “securitized.” Securitization, in layman's terms, means that the loan pool is figurately chopped up into loan pieces with varying risk and return profiles. The loan pieces are converted into bonds and sold to fixed-income investors. Post securitization, a Master Servicer takes over the responsibility of the loan servicing. The Master Servicer effectively becomes the “face” of the lender that borrowers deal with throughout their remaining loan term. Underwriting requirements are usually less stringent than banks.