Commercial Mortgage-backed Security

Commercial Mortgage-backed Security

Main article: Mortgage-backed security

Commercial mortgage-backed securities (CMBS) are a type of mortgage-backed security backed by mortgages on commercial rather than residential real estate.

CMBS issues are usually structured as multiple tranches, similar to collateralized mortgage obligations (CMOs), rather than typical residential "passthroughs." The typical structure for the securitization of commercial real estate loans is a Real Estate Mortgage Investment Conduit (REMIC), a creation of the tax law that allows the trust to be a pass-through entity which is not subject to tax at the trust level.

Many American CMBSs carry less prepayment risk than other MBS types, thanks to the structure of commercial mortgages. Commercial mortgages often contain lockout provisions after which they can be subject to defeasance, yield maintenance and prepayment penalties to protect bondholders. European CMBS issues typically have less prepayment protection. Interest on the bonds may be a fixed rate or a floating rate, i.e. based on a benchmark (like LIBOR/EURIBOR) plus a spread.

Read more about Commercial Mortgage-backed Security:  Organization, Industry Participants

Famous quotes containing the words commercial and/or security:

    “If men could menstruate ... clearly, menstruation would become an enviable, boast-worthy, masculine event: Men would brag about how long and how much.... Sanitary supplies would be federally funded and free. Of course, some men would still pay for the prestige of such commercial brands as Paul Newman Tampons, Muhammed Ali’s Rope-a-Dope Pads, John Wayne Maxi Pads, and Joe Namath Jock Shields—”For Those Light Bachelor Days.””
    —Gloria Steinem (b. 1934)

    “Those words freedom and opportunity do not mean a license to climb upwards by pushing other people down. Any paternalistic system that tries to provide for security for everyone from above only calls for an impossible task and a regimentation utterly uncongenial to the spirit of our people.”
    —Franklin D. Roosevelt (1882–1945)