Commercial Mortgages
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Conduit Lenders
Commercial Mortgage Backed Securities are a type of security investment secured by commercial mortgages. CMBS are generated by so-called "conduit" lenders, who originate commercial mortgages with the aim of securitizing them, arrange them into asset pools, and sell standardized sections of these pools to investors....
Government- and Agency-Sponsored Commercial Mortgages
A variety of agencies participate in lending on commercial properties by insuring commercial mortgages originated and (sometimes) serviced by approved commercial lenders. Some of these agencies are managed by the government, while others merely enjoy certain governmental assistance such as tax deferment or exemption.....
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Glossary of Terms Relating to Commercial Mortgages - Selections
- Debt Coverage Ratio
- The ratio of the income produced by a property to the monthly cost of a loan on the property. For instance, the debt-servicing ratio of a loan requiring monthly payments of $5,000 on a property that produces $7,000 per month in revenue would be 1.40. Also called Debt Servicing Ratio, or Debt Coverage Servicing Ratio.
- Declining Balance
- A type of prepayment penalty for commercial mortgages, according to which the penalty decreases over a period of time, up until a specified term. For instance, a 20 year loan may have a declining balance prepayment penalty stating that the penalty is 5% of the loan amount for the first year, 4% for the second year, 3% for the third year, etc., until the fifth year, when the borrower has the option of paying the loan off without penalty. If the borrower chooses not to pay the loan off at this point, then the declining balance begins over again. Also called "capped fees".
- Deed
- The legal document conveying title to a property. Also, Trust Deed, Deed of Trust, Trust Indenture
- Default
- Failure to meet legal obligations in a contract for a loan.
- Defeasance Clause
- A type of prepayment penalty according to which the borrower must replace the mortgaged property with Treasury securities of equal yield to the mortgage.