Cross-collateralization
Asset-Backed Securities glossary · Asset Specific Nuances
Definition
In CMBS, a structure where multiple properties (and/or borrowers) secure a single loan or pool of loans; default on any one triggers recourse to all.
Cross-collateralization in plain English
Sometimes a borrower owns several properties and takes out one big loan, or a lender ties multiple loans together. Cross-collateralization means ALL of those properties are pledged as security for the whole debt — so if the borrower stops paying on any single piece, the lender can go after every property in the group, not just the one that defaulted. It's like a group of friends co-signing one loan: if any one of them flakes, the lender can collect from all of them. This makes the loan safer for the lender because they have more to grab if things go wrong.
Learn these first
Practice Cross-collateralization
If a master trust is 'cross-collateralized,' what does this imply for the various series issued?
Related Asset-Backed Securities terms
Asset-Backed Securities practice questions · Asset-Backed Securities flashcards · Asset-Backed Securities study guide