CMBS plays a significant role in the CRE Multifamily lending market. The CMBS product provides access to non-recourse capital for a broad range of borrowers and property types. In the current environment it is even more crucial to understand terminology to be effective in today’s fluctuating market. The Mortgage Bankers Association has broken down common jargon of CMBS in plain terms.

Conduit Loan is another name for a CMBS loan. This refers to a loan that will be pooled together with many other loans into a conduit transaction. While all conduit loans are associated with CMBS, there are also CMBS loans that would not be referred to as a conduit loan, i.e.  – Loans that are securitized in a CRE CLO transaction for instance.

CRE CLO is a securitization vehicle backed by a pool of mortgages on transitional properties. The properties have loans that are commonly referred to as bridge loans, meaning that the properties are underperforming and the borrower intends to complete a business plan that will ultimately stabilize property performance. These bridge loans generally have a floating interest rate and a pool that serves as collateral for CRE CLOs is generally much smaller in terms of number of loans than a conduit transaction.

NRSCRO is a nationally recognized statistical rating organization is a credit rating agency that issues credit rating which the U.S. Securities and Exchange Commission permits other financial entities to utilize for certain regulatory purposes.

Yield Maintenance is a prepayment penalty that may be levied on a borrower who pays off their loan before maturity. The penalty effectively allows the lender call protection by providing them the same yield that would have received if the borrower continues making payment throughout the life of the loan.

Defeasance is a process by which a borrow map prepay their mortgage loan before maturity. The borrower must purchase U.S. Treasury Bonds or some other cash equivalent to replace the interest income that the lender would have received if the loan was not prepaid.

B-Piece Buyer is the purchaser of the most subordinate bonds in a conduit CMBS transaction. The B-piece buyer generally purchases some below investment grade and non-rated bond classes. This participant may also be referred to as the directing certificate holder or controlling class holder given that their position in the capital stack of being the first to accrue losses affords them certain decision making authority.

Non-Recourse refers to a loan where is the borrower defaults, the lender may obtain the collateral property but not further compensation from the borrower regardless of whether or not the collateral property covers the full value of the outstanding loan.


Nick Herz is a Managing Director & Partner in the Capital Markets Group of Boston Realty Advisors and heads the Debt and Financing Division. Nick supports the missions of both banks and a wide variety of Boston CRE investors and leaders.  He can be reached at and 617-416-1466.