Commercial property loans

A maximum of 10% of the cover pool can be commercial property loans and substitution assets cannot exceed 20%. To limit cash flow mismatching risk, the Irish bonds exhibit tight matching requirements. For example, the nominal value of the cover assets must at all times exceed the value of the corresponding securities. The aggregate interest from the assets must also exceed that of the covered bond and the currency of the cover assets must be similar to the related bonds. In addition to this, the duration of the cover assets must be greater than the duration of the bonds. 

Large multiborrower deals, where numerous commercial property loans, originated to numerous borrowers and secured on a variety of properties are grouped together into one transaction, in a similar way to a traditional residential mortgage deal. Such a deal may be either a traditional true sale transaction or a synthetic credit-linked structure. 

Whatever the structure, however, it is the performance of an underlying ring-fenced pool of commercial property backed loans (and therefore the commercial property itself) that will primarily determine the performance of the securitisations, and we believe that it is probably more appropriate, from an investor s perspective, to group transactions according to the type of credit analysis that is most useful for comparing these securities. 

The weighted average debt service cover ratio (DSCR) is an important element in the analysis of commercial property backed loans. It indi-... 

Commercial mortgages are loans made against commercial property. A CMBS is created from a pool, or trust, of commercial mortgages, whose interest and principal payments back the bond s cash. It is rated in the same way as a residential mortgage security and usually includes a credit... 

The financing of mortgage-backed loans for residential and commercially used properties (i.e., mortgage loans). 

The loans underlying commercial mortgage-backed securities are, as the name implies, for commercial, as opposed to residential, properties. CMBSs trade like other mortgage securities but differ in structure. 

Conduits are commercial lending entities set up solely to generate collateral to be used in securitization. They are required by more-frequent issuers. The major investment banks have all established conduit arms. Conduits are responsible for originating collateral that meets the investor s requirements on loan type (whether amortizing or balloon, and so on), loan term, geographic spread of the properties, and the time that the loans were struck. Generally, pool diversification in terms of size and location is desirable, since this reduces the default risk for the investor. After it has generated the collateral, the conduit structures the deal with terms similar to those of CMOs but with the additional features described in this section. 

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