Commercial Mortgage-Backed Security (CMBS)

Definition

Commercial Mortgage-Backed Security (CMBS) in plain English

Think of a bond as an IOU you buy: you lend money and get paid back with interest. A CMBS is a big bundle of loans made to businesses to buy commercial buildings — office towers, shopping malls, apartment complexes, hotels — sliced up and sold to lots of investors. The 'commercial' part is what makes it different from a home-mortgage bond: the payments come from rent that businesses collect, not from a family paying off a house. So when you own a piece of a CMBS, you're basically earning a share of the rent-driven mortgage payments flowing in from a whole portfolio of business properties.

Learn these first

• Controlling class
• Special servicer

Related Asset-Backed Securities terms

• Absolute Prepayment Speed (ABS)
• Advance rate
• Appraisal Reduction Amount (ARA)
• B-piece
• Basis risk
• Conduit CMBS
• Controlled amortization
• Controlling class
• Cross-collateralization
• Defeasance