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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

“B” Piece

A term applied to the classes or tranches of CMBS rated BB+ and lower, including the NR or non-rated tranche. Also called “B.I.G.,” or below-investment grade.

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Glossary

Balloon Mortgage

A mortgage requiring monthly payments of principal and interest in which the loan amortization term is greater than the term of the mortgage. Principal and interest payments are made until maturity of the mortgage, at which time full payment of the remaining principal, the balloon payment, is due. For example, in a ten-year balloon mortgage, with scheduled payments to amortize the loan in 30 years, part of the principal will be paid down through year ten, at which point the remaining balance will be paid as a lump-sum.

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Glossary

Balloon Risk

The risk that a borrower is unable to make a balloon or lump-sum payment at maturity. Also see Refinance Risk .

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Glossary

Bankruptcy Remote Entity (BRE)

A legal entity devised to insulate identifiable assets (e.g., mortgages) and/or individual borrowers from the effects of bankruptcy in a larger pool of assets. For example, a borrower might segregate selected mortgages in a BRE that are destined for a CMBS; therefore, if other mortgages to the same borrower were to default, the cash flow from the segregated assets would then not be interrupted or seized by a bankruptcy court, hence assuring a continuous cash flow to bondholders of a CMBS. Also see Special Purpose Entity .

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Glossary

Basis Risk

The risk that the cash flow from the underlying mortgage loans does not match the required payouts to bondholders because the offered certificates are tied to different indices than are the mortgages (e.g., mortgages are at fixed rates but bonds are at floating rates). This raises the possibility of the certificates accruing interest at higher interest rates than the underlying mortgage loans. Also see Basis Risk Shortfall.

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Glossary

Basis Risk Shortfall

When the aggregate amount of interest on the certificates is greater than on the collateral, the difference is known as the basis risk shortfall. Also see Basis Risk.

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Glossary

Below Investment Grade

See “B” Piece

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Glossary

Blanket Mortgage

A single mortgage collateralized by more than one property with the same owner. Also see Cross-Collateralization and Cross-Default .

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Glossary

BRE

See Bankruptcy Remote Entity 

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Glossary

Bucket

A grouping of loans by a single, shared attribute. For example, an issuer might speak of loans satisfying a term bucket (meaning that all the loans have the same or nearly the same average life). 

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Glossary

Bullet Mortgage

A mortgage that requires monthly payments of interest only until the final mortgage payment, or bullet payment, when full payment of principal is due.

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Glossary

Bundle of Rights

A common way to explain the complexities of property ownership -- how multiple parties can simultaneously hold interests in the same property, including, but not limited to the right to possess, extract, mortgage, alienate, or bequeath.

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