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Glossary
SASB
See Single Asset Single Borrower.
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Glossary
Seasoning
The length of time elapsed since the origination of a mortgage loan—i.e., the longer a loan has been outstanding and performing to its terms, the more “seasoned” it is. The presumption is that more seasoned loans have a lower probability of default. A loan that has been outstanding for perhaps three years but shows a poor pay history (e.g., several late pays, particularly beyond 30 days), is not considered seasoned because of its performance.
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Glossary
SEC
See Securities and Exchange Commission.
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Glossary
SEC Rule 144A
A legislation originally contained in the Securities Act of 1934 that restricts the sale of bonds not registered with the Securities and Exchange Commission (SEC). Unregistered certificates can only be sold to “qualified investors,” principally institutional investors, who can demonstrate that they meet certain standards of net worth and/or income and are therefore deemed to be sophisticated investors. Also see
Private Placements and
Qualified Institutional Buyers (QIB).Learn
Glossary
Secondary Market
The trading of securities that have been previously issued. Also see
Primary Market.Learn
Glossary
Secured Overnight Financing Rate (SOFR)
Benchmark interest rate for dollar denominated derivatives and loans that is expected to replace (LIBOR).
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Glossary
Securities
The generic term applied to Certificates of Ownership of the funds or assets of a trust fund. These undivided interests are issued by the trustee in amounts of $100,000 until less than $100,000 remains, then in amounts of $1,000. The certificates are usually issued in lettered classes starting with Class A, the highest-rated class. Each class is risk-rated by one or more of the major rating agencies. If the higher risk first-loss class is included in the security and sold rather than being held by the seller, the class is rated as “NR” (not rated). The “not rated” risk-rating is used for securities not qualifying for the minimum risk rate.
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Glossary
Securities Act of 1933
This act established registration requirements and antifraud provisions. It requires new issues to be registered with the SEC and meet prospectus requirements. New issues can be exempt from these requirements if certain conditions are met.
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Glossary
Securities and Exchange Commission (SEC)
The regulatory agency charged with establishing the proper procedures for the registration and sale of publicly-traded securities and monitoring that these procedures are maintained in the interest of a fair public market.
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Glossary
Securitization
The creation of a new financial instrument representing an undivided interest in a segregated pool of assets such as commercial mortgages. The ownership of the assets is usually transferred to a legal trust or special purpose, bankruptcy-remote corporation to protect the interests of the security holders.
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Glossary
Self-Amortizing Loans
Loans for which the full amount of the principal will be completely paid off at the loan’s termination pursuant to the loan’s payment schedule. Also called fully amortizing loans.
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Glossary
Senior Pieces
Security classes, or tranches, that are rated as investment grade, therefore appropriate for regulated institutional investors (i.e., triple-A, double-A, single-A, and triple-B).
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Glossary
Senior/Subordinate Structure
A common structure used in CMBS involving a prioritization of cash flows. For example, in a simple two class senior/subordinate structure (also known as an A/B structure),
a)
Class A will receive all cash flow up to the required scheduled interest and principal payment;
b)
The subordinate class, Class B, provides credit enhancement to Class A, and
c)
Class B will absorb 100% of losses experienced on the collateral until cumulative losses exceed Class B’s amount; thereafter Class A will absorb all losses.
Also known as a sequential pay structure.
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Glossary
Sequential Pay Structure
See Senior/Subordinate Structure.
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Glossary
Servicer
Party responsible for the administration of mortgage loans in a CMBS transaction, acting for the benefit of the certificate-holders. The servicer’s responsibilities include reporting to the trustee, collecting payments from borrowers, advancing funds for delinquent loans, negotiating workouts or restructures (as permitted by the pooling and servicing agreement) and taking defaulted properties through the foreclosure process. Also see
Master Servicer and
Special Servicer.
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Glossary
Servicing Advances
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Glossary
Servicing Transfer Event
An event (as defined in the PSA) that triggers the transfer of the management of a mortgage loan from the master servicer to the special servicer (e.g. after a loan becomes 60 days delinquent). A servicing transfer event occurs when a borrower has defaulted or, in the reasonable judgment of the master servicer, is likely to default and be unable to cure within a reasonable time. In this event, the master servicer can transfer the day-to-day handling of the account to the special servicer until such time as the special servicer determines that the default has been cured and that the loan is a corrected mortgage loan.
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Glossary
Shadow Anchor Retail
A major retail tenant that provides significant drawing power to a retail center but which itself may not be part of the particular shopping center or the specific collateral—for example, a shopping center consisting of several in-line stores with a Wal-Mart on an outparcel that is not collateral for the loan but serves as an anchor. Although the Wal-Mart is not part of the shopping center, the store nonetheless serves as a shadow anchor to the other property and in-line stores.
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Glossary
Single Asset Single Borrower (SASB)
Single Asset Single Borrower (SASB) CMBS transactions involve the securitization of a single, usually very large, loan which is collateralized by either a single property or a group of cross-collateralized/cross-defaulted properties all owned by the same borrower, or owned by a related group of borrowers.
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Glossary
Single Tenant Triple Net Lease (NNN)
Lease agreement on a property where the lessee (tenant) agrees to pay the net amount for following three types of costs: real estate taxes on the leased asset, building insurance, common area maintenance.
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Glossary
SNDA
An agreement, often in recordable form, between tenant, lender and the borrower. An SNDA is a negotiated item and not automatic for lenders to provide. The SNDA is designed to subordinate the tenant’s lease to the lender in return for the lender agreeing not to disturb the tenant if borrower defaults, and tenant agrees to attorn and make payments to the lender after notice of borrower’s default.
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Glossary
SOFR
See Secured Overnight Financing Rate.
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Glossary
SPC
Special Purpose Corporation. See Special Purpose Entity.
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Glossary
SPE
See Special Purpose Entity.
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Glossary
Special Purpose Entity (SPE)
A bankruptcy-remote entity established by the borrower(s) at the loan level and the issuer at the securities level whose sole asset is the property or properties being financed. The SPE protects the lender and, ultimately, the certificate holders of a security, from having the underlying property involved in bankruptcy proceedings against the borrower on the property; in the event of a bankruptcy or insolvency of the borrower or issuer, an automatic stay would apply and delay payments to investors. Rating agencies generally request counsel to provide “true sale” opinions on the sale from the transferor to the issuer and “non-consolidation opinions” confirming that the entity is indeed bankruptcy remote. Also called a special purpose corporation (SPC) or special purpose vehicle (SPV).
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Glossary
Special Purpose Vehicle (SPV)
See Special Purpose Entity.
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Glossary
Special Servicer
A party in addition to the master servicer that is responsible for managing loans that go into default and conducting the “work-out” or foreclosure process, e.g., liquidating of loans and advancing the proceeds to the trustee. There are various types of special servicers:
a)
Those that retain first-loss pieces;
b)
Those that invest in B-pieces in return for special servicing rights; and
c)
Those that are appointed solely because of their specialized asset management
d)
expertise.
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Glossary
Special Servicing Fee
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Glossary
Standby Fee
The portion of the special servicer’s compensation that accrues with each mortgage loan, including performing as well as specially serviced mortgage loans and those which have been converted to REO. This fee accrues at the standby fee rate and is payable by the master servicer from its master servicing fee.
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Glossary
Startup Day
The first day on which interests in the REMIC are issued.
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Glossary
Stress Test
A series of tests performed by the rating agency which project the performance of the mortgage pool under varying scenarios or stress related assumptions. The rating agency determines the likelihood of timely repayment using historical loan experience for the collateral type and its own statistical database concerning probability of default and severity of loss. The stress tests to which the pooled loans are submitted include analysis of the mortgage documents, real property collateral, tax structure, geographical distribution, loan servicing and administration issues. For example, a stress test might assess the impact of a change in interest rates on debt-service coverage ratios (DSCRs).
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Glossary
Structuring
The process of combining mortgages and the creation of corresponding CMBS classes in such a way as to achieve the highest price for a transaction, based on capital market factors prevailing at that time. Also see
Waterfall.
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Glossary
Subordinate Ground Lease
A lease on a parcel of land in which the rights attributable to the lease are junior, or secondary, to another more senior obligation.
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Glossary
Subordinate Lien
A collateralized secondary loan, or mortgage, in which the rights to the collateral are junior, or subordinate, to another debt or obligation.
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Glossary
Subordination
A form of credit enhancement that determines the structure of a CMBS transaction, in terms of the distribution of the risk of credit loss via the face amount allocated to each discrete rating class. Also see
Senior/Subordinate Structure and
Waterfall.
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Glossary
Subordination, Non-Disturbance, and Attornment Agreement (SNDA)
An agreement, often in recordable form, between tenant, lender and the borrower. An SDNA is a negotiated item and not automatic for lenders to provide.
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Glossary
Sub-Performing Loan
A loan that is making partial or full interest and principal payments, but with a debt service coverage ratio (DSCR) that would be unacceptable if underwritten at this time. A loan may be classified as sub-performing even if monthly payments are current if the loan-to-value ratio (LTV) or other primary value indicator suggests that the loan is unlikely to be able to pay off in full at maturity.
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Sub-Servicer
A servicer contractually engaged by the master or special servicers to perform some of the real estate services required under pooling and servicing agreements, such as property inspections, foreclosure services or individual loan administration. The master or special servicer is legally responsible for the activities of the sub-servicers. Sub-servicers are more likely to be engaged for specialized property types or if there is a small number of loans, a subset of the total portfolio, in a given area.
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Glossary
Survivability
The enforceability of reps and warranties made by the lender prior to the securitization process, after the creation of the securities.