CMBS loans have become an increasingly popular way for commercial real estate developers and investors to get the capital they need to succeed. But what are they, how do they work, and are they right for your project? Here’s everything you need to know about CMBS loans and how to get a quote from us.
We Provide CMBS Loans Nationwide
CMBS lending is available anywhere from $1 million up to theoretically no max loan amount. While these do go down to $1 million, many times the transaction costs don’t make sense for such a small loan size. Most lenders in the space will start looking at loans around $3 million and go up from there.
Lenders in this space will go up to 75% for most asset types. Many times we can deliver loan terms that are higher than 75%, but it will be building in mezzanine or preferred equity to get that high.
The most common fixed term for CMBS loans is 10 years. Both 5 and 7 year fixed periods are available, but will not be as competitively priced as 10 year loans.
30 year amortizations are the standard for these types of loans. Interest only is available for almost any LTV, and full term interest only typically starts at 65% LTV.
Non-recourse with bad boy carve outs is the standard structure for conduit lending.
Lending is available in all markets, regardless of geography.
Commercial real estate loans that can be used for the acquisition and refinance of stabilized commercial property.
While CMBS loans are typically used for standard investment property types, special use properties can be securitized as well.
CMBS Lending Guide Video
What is a CMBS Loan?
A CMBS loan, or commercial mortgage-backed security loan, is a form of financing for a commercial real estate property. It’s also known as a conduit loan, and the lenders that provide these CMBS conduit loans are known as conduit lenders.
What sets CMBS loans apart from traditional commercial mortgage loans is that lenders don’t keep the loans they originate. They’re ultimately sold as CMBS bonds in bundles to investors, a process known as securitization.
CMBS Loan Origination
While CMBSs may be different from traditional commercial real estate loans, their origination process is relatively similar. This two-step process begins with the issuance of a term sheet to the borrower. This sheet will provide details about the loan amount, loan rate, and other terms. Once the approval process is complete, including appraisals and other due diligence, the loan will be securitized and sold to investors.
As a result, the organization that you interact with to service your loan usually won’t be the same one that originates the loan.
CMBS Loan Maturity
Maturity in lending refers to the date when the last payment of a loan is due, at which point the loan will be considered ‘paid off.’
In a CMBS loan, that final loan payment may not be due to the loan originator, as your loan will have likely been sold on the market as a bond after being bundled with other CMBS loans.
CMBS Underwriting Parameters
The process for underwriting a CMBS loan can often be a bit more relaxed than in a traditional commercial real estate loan. That’s because CMBS loan underwriting is mainly focused on assets. This makes a borrower’s financial history, including less-than-ideal credit, less of a limiting factor when it comes to getting approval.
Which types of properties are CMBS eligible?
Wondering whether a CMBS loan could be useful for your unique project? Commercial mortgage-backed securities can be used for the full range of commercial real estate projects, including:
- Hotel development, purchasing, refinancing, and renovation
- Multifamily commercial real estate (apartments, condo complexes, etc.)
- Office buildings
Have questions about whether your project could qualify for CMBS financing? Contact us today and we’ll be happy to answer all of your questions.
Who issues CMBS loans?
CMBS loans can be issued by a range of CMBS lenders, ranging from big names to lesser known institutions. That said, around 50% of all CMBS loans come from one of the following major players from our CMBS lenders list— not including loan programs from Fannie Mae and Freddie Mac:
- JP Morgan Securities: $3.4 billion in loan volume, 17.7% of market share
- Deutsche Bank: $2.7 billion in loan volume, 14.1% of market share
- Goldman Sachs: $3.8 billion, 9.6% market share
- Wells Fargo Bank: $3.1 billion, 7.6% market share
At Clopton Capital, our wide range of partners in the world of CMBS lending means that we can access the best possible terms for you based on your needs and financial situation.
Types of CMBS
There are several types of CMBS loans, and a commercial property’s eligibility for a CMBS depends on its type and use. Here are some of the most common categories for financing commercial properties.
- Self-storage facilities
- Industrial property
- Parking facilities
- Mobile home parks
- Hospitals and healthcare properties
CMBS Loan Features
CMBS loans feature many of the familiar elements of commercial real estate loans, except for the fact that they are made to be sold to investors through bonds. The way that they’re handled for tax purposes also differs for lenders, but that doesn’t directly affect you as a borrower.
CMBS loans also feature flexible underwriting, favorable terms for borrowers, and the chance to get your project underway even without a stellar financial history.
CMBS Loan Rates
CMBS rates are constantly changing based on market conditions, but the current trend in the industry means that rates are in a historically great place! For a more detailed estimate of current rates based on the type of loan you’re seeking, use our hotel loan estimate calculator below.
CMBS Loan Calculator
Want to know what your CMBS loan might look like? Use our calculator for a rough estimate, whether you’re looking for a construction loan or more traditional mortgage. Keep in mind that we’ll need to know more details about your specific case in order to provide a more accurate assessment of potential CMBS loan options, but this calculator should provide a great starting point on your journey to getting the commercial real estate funding you need to succeed.
Have you heard the term ‘CMBS ETF’ and wondered what it meant? The CMBS ETF tracks the investment results of an index that’s composed of commercial mortgage-backed securities, also known as CMBT loans. This index provides a picture for the finance injury of how CMBSs are performing at a given time.
CMBS Loans in Special Servicing
One concern many borrowers have when considering a CMBS is loan servicing. Because their loan will be sold after it’s originated, they wonder whether they’ll receive servicing benefits or be left in the cold. Fortunately, CMBS loans are generally serviced at the same level as commercial real estate loans. This includes special servicing, which occurs when a borrower defaults, is behind on mortgage payments, delinquent, or experiences low occupancy or unpaid property taxes.
How do CMBS Loans Work?
When you enter into a traditional commercial loan, you agree to pay back the original lender at a specified interest rate and period. But in a CMBS loan, your loan is packaged with others like it and bundled into a trust. This trust is known as a real estate mortgage investment conduit (REMIC), and it gets turned into a series of bonds and then sold to real estate investors. This is called securitization.
How does CMBS Securitization process work?
Once your CMBS is sold, it will likely be managed by a loan servicing company. If any issues pop up over the course of this loan, you’ll interact with that loan servicing company rather than the company that initially lent you the money. While this shouldn’t cause any major issues, it’s important to know up-front so you don’t run into any unexpected confusion later.
CMBS Loan Prepayment Penalties
Like many other types of CRE loans, CMBS loans sometimes come with prepayment penalties. These are usually structured either as yield maintenance, which means you pay off the loan plus a specific percentage between 1-3%, or defeasance, which gives borrowers the opportunity to swap out their debt for comparable CMBS securities to compensate the investor or firm that owns the loan.
How are CMBS sold?
Unlike other commercial real estate loans, where lenders intend to make a profit from interest paid on the loan, CMBS loans are made to be sold. This process happens through the bundling of multiple, similar CMBS loans into bonds which are then sold to investors at a wholesale price.
What happens once a CMBS loan is sold?
Once a CMBS loan is sold, it falls under the ownership of whatever organization purchased it and others like it in a bond. Servicing of the loan usually falls on a loan servicing company, but the terms of your loan won’t change in terms of payment amount, schedule, and rates.
How to invest in CMBS
Want to experience commercial mortgage-backed securities from the investment side? If you’re wondering how to invest in CMBS, they can be a lucrative and dependable form of investment. If you have more questions about investing in CMBS loans, reach out to us and we’ll be happy to answer any questions you have.
CMBS Loan Assumption
One of the benefits of CMBS loans is that they’re assumable, which means that if you sell the property to someone else, they can take on the loan with the same terms. This can be a huge incentive for potential buyers as they won’t have to set up new financing in order to purchase your property.
CMBS Loan Assumption Advisors
We’re tapped into a large network of loan assumption advisors who specialize in CMBS loan assumption. If you want to learn more, contact us in order to find out how you can be put in touch with some of the most trusted CMBS loan assumption advisors in the market.
CMBS Loan Assumption Process
The loan assumption process requires that both parties are aligned in terms of priorities, preferred terms, and the details of the assumption. One downside of this process is that approval can take time, time which can get in the way of either the buyer’s or the seller’s plans.
CMBS Loans Pros and Cons
CMBS loans aren’t for everyone. They have their downsides, and they may not be effective for your unique situation. But they can also provide a range of high-value benefits that make them attractive for a wide range of commercial real estate investing experts. Here are some of the pros and cons of CMBS loans.
The Advantages of CMBS Loans
- Available to a wide range of borrowers, even those with poor credit or bankruptcies
- Non-recourse loans, protecting borrowers from personal liability for debt
- High leverage
- Competitive rates
- Allow cash-out refinancing
The Disadvantages of CMBS Loans
- Most have prepayment penalties
- Often don’t permit secondary or supplemental financing
- Many require reserves set aside for insurance, taxes, etc.
Have additional questions about CMBS financing, mutual funds, and related topics? Here are some of the most common questions we receive about commercial mortgage-backed securities.
Are CMBS loans non-recourse?
Yes, CMBS loans are non-recourse, which means a lender can’t go after your personal property in order to make up the debt.
Who provides CMBS loans?
A wide range of lenders, from major financial institutions to lesser-known organizations.
How do banks make money on CMBS?
Banks make money on CMBS loans by selling them in bundles to investors, similar to the way that wholesalers earn money in the retail world.
CMBS loans from Clopton Capital
Wondering what kind of loan terms you can expect from Clopton Capital for a CMBS loan?
- Loan amounts from $1 million upward
- Every city, town, and rural area in the USA
- Property types include CMBS multifamily loans, retail, office, industrial, hospitality, etc.
- 5, 7, & 10 year fixed periods, ballooning or refinancing at the end
- Up to 30-year amortizations with interest-only periods a consideration
- Non-recourse, subject to bad-boy carve-outs
- Reserves for taxes, insurance, & cap-ex
- Yield maintenance OR defeasance prepayment
Like all lending in the commercial arena, it is a CMBS loan requisite to only fund industrial, commercial, hotels, and multifamily – never residential. Then too it has to be a first lien loan, thus canceling out 2nd lien advances from the equation. The interest rate is always fixed (i.e. never variable) and amortized generally over 25 – 30 years. However, the loan terms are ranged between 5 to 10 years, with 15 years considered extraordinarily long. Sometimes an interest-only period of payment is included. Now with amortization and term being unaligned, typically these loans end with a big balloon payment or otherwise need to be refinanced. It is adaptable to most borrower structures including partnerships, trusts, corporations, LLCs, Delaware Corporations, estates, and even foreign nationals. Properties in every USA city, town or country district qualifies for consideration.
Get a CMBS Quote Today
Clopton Capital prides itself on its seamless ability to give borrowers on-demand access to the most competitive commercial mortgage lenders handling CMBS transactions in the business – and any other funding option for that matter. We can demonstrate several billion dollars in closed commercial leveraging deals over the last 10 years built purely on trust and close relationships with primary lenders in every state. If anyone can make a CMBS facilitation possible for you, we can. When you connect with us you are sure to enjoy the uninterrupted and focused attention that our open-book communications policy is famous for providing.
To understand more about CMBS loans and the securitization process, or to get a fast quote, contact one of our commercial mortgage lenders by calling 866-647-1650 or using the Contact Us form available from the menu. We’re always happy to work with investors to find the right CMBS loan rates and repayment plans to suit your needs. And with low closing costs attached to a straightforward documentation and underwriting process, your commercial loan experience will be stress free.