Representing the Borrower in a CMBS Loan

Summary

When making a mortgage loan on a commercial real estate asset, instead of holding the loan on its balance sheet until maturity, the lender may intend to securitize and sell the loan as commercial mortgage-backed securities (CMBS). This practice note provides guidance for counsel representing a borrower in connection with a CMBS loan and starts with a general overview of the securitization process. The remaining portions of the practice note (1) explain, and offer negotiating tips and drafting suggestions for, certain loan document provisions unique to CMBS loans (e.g., defeasance provisions and rating agency confirmation requirements); (2) offer negotiating tips and drafting suggestions for certain standard loan document provisions that require careful attention in a CMBS loan; and (3) discuss closing conditions unique to CMBS loans or not commonly encountered in balance sheet loans.