CMBS Concerns

By: Clayton B. Gantz | Tom Muller
Are securitized loans worth the trouble?

Since becoming popular in the 1980s, commercial mortgage-backed securitization promised commercial real estate borrowers access to more loan capital, often at the most competitive interest rates. The trade-off was more complexity in loan structure and documentation and very little flexibility to make changes to the loan and the property securing it.
 
Elaborate Real Estate Mortgage Investment Conduit rules and rating agency requirements impose extensive and minutely detailed requirements regarding the loans and the structure and management of the loan pool. The REMIC rules limit the ability to alter the loan or collateral, and the rating agency requirements force borrowers to set up special purpose entities with exhaustive restrictions on the conduct of the borrower’s business.
 

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