CMBS tend to be more complex and volatile than residential mortgage-backed securities due to the unique nature of the underlying property assets.
Many American CMBS transactions carry less prepayment risk than other MBS types, thanks to the structure of commercial mortgages.
In a CMBS transaction, many single mortgage loans of varying size, property type and location are pooled and transferred to a trust.
The CMBS transaction is structured and priced based on the assumption that it will not be subject to tax with respect to its activities; therefore, compliance with REMIC regulations is essential.
The enhanced liquidity and structure of CMBS attracts a broader range of investors to the commercial mortgage market.
Mortgage-backed securities can be distinguished by the type of real estate behind the collateral:[4] The characteristics of Commercial MBS vary depending on the term.
RMBS are securities backed by a home or residential apartment loan bundle, allowing investors to benefit from mortgage payments and homeowners' interest.
The risk profiles and the repayment structures of these securities can differ significantly due to the nature of the residential versus commercial real estate markets.
The trustee’s primary role is to hold all the loan documents and distribute payments received from the master servicer to the bondholders.