AN EXAMINATION OF COMMERCIAL MORTGAGE-BACKED SECURITIES-SOME USEFUL INSIGHTS FOR BORROWERS

Commercial mortgage-backed securities (CMBS) have emerged strong and have faced a generally positive credit environment since the last recession. As the market grew out of recession in the early 1990s, the primary focus remained on pro-viding better and safer returns to investors. Tied in their lock box, a period that con-tractually prohibits the borrower from all prepayments, the borrowers kept holding tightly onto their loans. Currently, as the delinquency rate on loans has been on the rise, and as the mortgage market offers refinancing opportunities at lower interest rates, more and more borrowers are looking to transfer or to refinance their loans. This paper examines commercial mortgage-backed securities and provides useful insights for borrowers to find their way out of CMBS loans. Fundamentals of Securitization The primary idea of securitization is to create certain instruments that can be placed in the market. One such application of the securitization technique is the creation of mar-ketable securities out of (or based on) receivables. The intention of such an application i