Conduit Lending
Overview
Conduit loans have
been around for less than 15 years
and are somewhat unfamiliar to most commercial real estate
investors. A conduit
loan is a permanent,
fixed-rate commercial real
estate loan structured on a non-recourse basis
according to specific underwriting and documentation
standards. These standards facilitate the loan's
ultimate securitization. Conduit loans are also know
as CMBS loans -
commercial mortgage
backed securities.
Conduit Financing Provides Low Rates To Borrowers
Conduit loans
typically
provide lower fixed-rates when compared with
traditionally
commercial real
estate loans.
Conduit
loans are securitized and sold as commercial
mortgage backed
securities to investors with
the asset (property) serving as the collateral for
the bonds.
Conduit loans are
priced based on the
comparable "on the
run" treasury rate
plus a spread.
Property quality
grade, tenant
quality, tenant bond
grade, property
location,
management,
seasoning, property
cash-flow, and area
CAP rates all impact
spread either
positively or
negatively.
Prepayment on a
conduit loan is much
different than with
traditional
commercial loans.
Prepayment on a
conduit loan is
typically defeasance.
Defeasance allows
the borrower to
purchase substitute
collateral for the
conduit loan.
With conduit
loan defeasance, single
or multiple US
Treasury securities
with varying
maturities must be
purchased in order
to complete the
defeasance. There is
no minimum
prepayment under
conduit loan defeasance, and in
some circumstances,
the borrower could
actually receive a
payment when the
conduit loan is defeased.
Other forms of
prepayment penalties
include yield maintenance.
Yield maintenance is
based on a minimum
yield to the
investor
that
purchased the
conduit loan
(or the Fannie Mae
security backed by
the loan) and is
basically the
present value of the
difference between
the conduit loan’s interest
rate and current
rates with a similar
maturity date as the
original conduit loan. Historically,
Yield Maintenance
terms have been 6
months less than the
actual conduit loan term.
CommercialBanc, a
direct conduit lender,
provides conduit loan programs for commercial real
estate property types nationwide.
Our minimum loan size for conduit financing is
$1,000,000. You can review all of our conduit loan
program guidelines online, check
interest rates online, calculate the cost to defease
your CMBS loan, and even track and review the status
of your conduit loan throughout the entire
commercial loan process! Contact a commercial
mortgage banker at 1-866-706-BANC for more
information. |
