Tuesday, April 1, 2008
Types of CMBS in the Market
Agency --Ginnie Mae passthrough certificates backed by loans insured by FHA. Loan limit, prepayment features, or the presence of rent subsidies will affect the performance of a pool. --Fannie Maeo. the most porminent program is Delegated Undweriting and Servicing (DUS) program. DUS are differentiated by credit tiering, with each security assigned a rating from one to four. Each DUS is placed in a tier based on tis loan-to-value ratio and minimum debt coverage ratio, wtih tier four being the highest quality. Non Agency or Private Label - Majority --Some are collateralized by pools of seasoned commercial loans. Challengs: a wide range of coupons and loan types and wide prepayment protection --Most private label CMBS are backed by newly originated loans. Two major categories: backed by loans made by a single borrower vs backed by loans made by multiple borrowers. --single borrower deals can involve one property or a group (large properties such as office building or reginonal malls). lower reserving requirements; pall properties backing a particular deal are cross-defaulted. A release provision rqeuires a borrower to prepay a percentage of the remaining balance of the underlying loans if it wishes to prepay one of hte loands and remove the property from the pool. --Multiple borrowers are more common. Conduit deals are the most prevalent examp.le of multiple borrower deals. --Conduit deals: loans types tend to be more homogeneous and call protection is strong. --Another kind of CMBS deal is one backed by lease on property. These triple-net lease or crdit tenant loan deals are collateralized by lease agreements between the property owner and a tenant. Majority of these securities have been collateralized by mortgages on retail stores with lessess, such as Wal-Mart.