eFinancialCareers

What are they?

As the name suggests, a commercial mortage backed security is a mortgage backed security formed by securitising the stream of future repayments on a commercial mortgage.

CMBS are just like residential mortgage backed securities, except their debt is secured against commercial rather than residential mortgages.

The CMBS market in Europe and Asia was not nearly as well developed as the market in the US. In the first eight months of 2007, £11.5bn of commercial mortgage backed securities were issued in the UK market. By comparison, $38.5bn of CMBS were issued in the US in March 2007 alone.

What have they got to do with the financial crisis?

CMBS have suffered the same fate as other forms of asset backed securities linked to mortgages – no one wants to buy them any more.

Issuance figures show just how dire the situation has become. In the first eight months of 2008, no new CMBS deals were done at all in the UK.

In the US, a total of $253bn of CMBS were issued in 2007, according to the Return to A-Z home page