What is a CMBS loan?

A CMBS (Commercial Mortgage-Backed Securities) loan, also called a conduit loan, is a commercial real estate loan that is pooled with other loans and sold to investors as bonds on the secondary market. CMBS loans typically offer competitive fixed interest rates for terms of 5–10 years, non-recourse structures, and are available for most commercial property types. The underwriting is standardized because the loans must meet securitization requirements. Once securitized, they are serviced by special servicers, and modifications or early payoffs are difficult or expensive. Prepayment typically requires defeasance or yield maintenance, which can be very costly. CMBS loans work best for stable, cash-flowing properties held to term.