What Is a CMBS Loan?

Commercial mortgage-backed securities, or CMBS, loans are like bonds. Investors buy bundles of mortgages secured by income generators such as shopping centers, hotels and warehouses. The original lenders dump the risk and the investors reap the interest. If you're considering this route to financing your project, there's more to consider than the relatively relaxed requirements to qualify.

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Avoiding Personal Responsibility

Generally, you don't have to personally answer for CMBS-created debt. With multiple mortgages in the pool, your loan likely won't be called as due as long as the investor gets payments from other loans. Also, unlike bank loans, you're not required to personally guarantee payment of a CMBS loan. If you default by missing payments, for example, the mortgage holder's only recourse is to the property securing the loan.

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Source: ehow.com

Category: Credit

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