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CRE Finance Council Commercial Mortgage-Backed Securities (CMBS) Glossary 

The CREFC CMBS glossary is always changing. If you have suggestions for term additions, please contact us.
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Glossary

NAIC

See National Association of Insurance Commissioners.

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Glossary

National Association of Insurance Commissioners (NAIC)

An association of regulators of insurance companies headquartered in Kansas City whose recommendations, while not binding on members, they are generally followed. As a result, NAIC rulings can be important to the CMBS market. For example, the NAIC determines the reserves that life companies are required to retain against either mortgages or bonds. There was recently a controversy over whether a CMBS collateralized by a single asset was really a mortgage (requiring higher reserve levels) or a bond (with lower capital reserve requirements).

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Glossary

NCF

See Net Cash Flow.

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Glossary

NCREIF Index

Numerous indices compiled by the National Council of Real Estate Investment Fiduciaries (NCREIF) on commercial real estate performance based on data provided principally by pension funds’ equity real estate. Often used as a benchmark for real estate investment performance.

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Glossary

Negative Amortization

When the scheduled interest payment on a loan is less than the interest accrued according to a certain interest rate, this shortfall is added to the outstanding principal balance. Therefore, as the loan progresses, the principal balance due on the loan grows with time. This is known as negative amortization and often occurs in Adjustable Rate Mortgages (ARMs) when the borrower’s capacity to service the loan falls short of the interest due.

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Glossary

Net Effective Rent

Defined as the gross revenue from rental payments less operating expenses, rental concessions, tenant improvements, etc. In weak or declining markets, net effective rent may be negative.

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Glossary

Net-Net Lease

See Double-Net Lease.

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Glossary

Net-Net-Net Lease

See Triple-Net Lease.

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Glossary

Net Cash Flow (NCF)

Gross operational revenues earned by a property less operating expenses as well as tenant improvements, leasing commissions and reserves, but before mortgage payments. May be expressed as:

NCF = NOI – (tenant improvements + leasing commissions + capital repairs).

 

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Glossary

Net Operating Income (NOI) 

Total revenues earned by a property less operating expenses but before capital items and debt service.. NOI is typically used to analyze the profitability of income-generating real estate investments and as the basis for calculating debt service coverage ratios.

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Glossary

NOD

See Notice of Default.

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Glossary

NOI

See Net Operating Income.

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Glossary

Non-Consolidation Opinion

An attorney’s reasoned opinion which concludes, based on all relevant facts concerning the loan and borrower structure under current bankruptcy case law, that the assets and liabilities of the special purposes entity (SPE) borrower would not be substantively consolidated with those of its affiliates by a bankruptcy court under Section 105 of the bankruptcy code.  This is often a key component of special purpose entity (SPE) and bankruptcy remote structures.

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Glossary

Non-Performing Loan

A loan that fails to make principal and/or interest payments as required by the loan agreement. This includes loans that are making payments at a rate less than the full principal and interest payments required by the mortgage.

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Glossary

Non-Recoverable Advance

If an advance made on behalf of a non-performing or otherwise defaulted loan by a master servicer, special servicer or trustee is, in their judgment, deemed unrecoverable from related proceeds or another specifically identified source, this advance is not required to be made.

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Glossary

Notice of Default (NOD)

A notice posted by the mortgage lender (or other appropriate party) in public records to initiate foreclosure proceedings involving a public sale of the property securing the mortgage. NOD also includes the right to be informed of a borrower’s default on a major contract such as a ground lease.

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Glossary

Notional Amount

A stated dollar amount on which a calculation is based, such as the payment on a swap contract or an IO strip.

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