True sale transactions

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. 

The preceding sections discussed how variations in securitization structures can affect direct transaction costs and flexibility. Each structure is also associated with certain indirect costs and benefits. For example, transaction costs are not limited to direct expenses, such as fees for lawyers, investment bankers, and liquidity or credit enhancement facilities. They also arise from the true sale requirement. ... 

There are two basic forms of pooled commercial mortgage transactions the true sale and the synthetic structures. The true sale mechanism, as its name suggests, involves the sale of assets from the originator s balance sheet to an SPV, which are then used as security for the issue of notes to investors. Synthetic structures, by contrast, involve the creation of a credit derivative linked to the performance of a pool of loans. The loans themselves remain on the balance sheet of the originator but the credit risks associated with these loans are transferred through the credit derivative to investors. Synthetic structures can simplify the issuance process and avoid many of the complexities (and costs) associated with the sale of assets in many jurisdictions. 

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