CMBS (Commercial Mortgage-Backed Securities)

Category: finance

Fixed-income investment products that are backed by mortgages on commercial properties rather than residential real estate.

CMBS is the "wall street packaging." Banks take hundreds of commercial loans (on hotels, malls, offices), bundle them together into a giant pool, and sell bonds backed by the cash flow of those loans. They are highly complex and strictly non-recourse to the borrower.

Common Examples

• The developer secured a 10-year, interest-only CMBS loan to refinance the stabilized, multi-state self-storage portfolio.
• Because CMBS loans are bundled and sold to bondholders, they are notoriously inflexible when a borrower needs to negotiate a modification.