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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

Acceleration Clause

Contract provision that allows lender to require a borrower to repay all outstanding principal if loan covenants are not met.

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Glossary

ACLI

See American Council of Life Insurers.

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Glossary

Accrual Rate

The periodic rate at which interest is due on a mortgage. This may differ from the pay rate.

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Glossary

Accrued Interest

Interest due on a loan that has not yet been paid. Before any principal reductions are allowed on the loan, the accrued interest is added to the principal balance and commonly must be paid.

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Glossary

ADA

See Americans with Disabilities Act, 1990.

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Glossary

Additional Servicer Compensation

Compensation paid to a master or special servicer upon receipt of certain fees or income, or completion of certain responsibilities.  Such fees may include all assumption and modification fees, late payment charges and similar fees paid by borrowers on specially serviced and non-specially serviced loans as dictated by the pooling and servicing agreement (PSA).  This fee is generally separate from a Special Servicing Fee, Workout Fees or Liquidation Fee.

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Glossary

ADR

See Average Daily Rate.

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Glossary

Adjustable Rate Mortgage (ARM)

A mortgage loan on which the interest rate adjusts periodically (e.g., monthly, every six months, annually). The rate is stated as a spread over a published index rate such as the 10-Year Treasury, the London Inter-Bank Offer Rate (LIBOR), or a successor rate to LIBOR such as the Secured Overnight Financing Rate (SOFR). Also known as a variable rate mortgage.

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Glossary

Administration Rate

The annual rate of the servicing fee and trustee fee, expressed as a percentage of the outstanding principal balance of each loan.

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Glossary

Advances

Generally defined as customary, reasonable and necessary out-of-pocket costs and expenses incurred by the master servicer or special servicer in connection with the servicing of a mortgage loan after an event of default, delinquency or other unanticipated event or in connection with the administration of an REO property. These advances are paid by the master servicer or sometimes the special servicer and are generally reimbursable from future payments and other collections. In all cases, the required servicing advances are detailed in the pooling and servicing agreement.  P&I advances are required in order that CMBS certificate payments can be made according to schedule.  As reimbursement, the servicer has a proxy claim to subsequent proceeds (whether from property/loan collections, foreclosure or sale proceeds). Servicers are paid interest (often prime plus one percent) on their advances.  Servicers may continue to make advances on a loan up to an amount that it has determined as “recoverable.” (See Non-recoverable Advance ).

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Glossary

Agency Securities

 
Securities issued by governmental or quasi-governmental
agencies such as Fannie Mae (Federal National Mortgage Association), Freddie Mac (Federal Home Loan Mortgage Corporation), or Ginnie Mae (Government National Mortgage Association). Agency securities are not rated by rating agencies but carry an implied triple-A rating.
 

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Glossary

Aggregation Risk

The interest rate, pricing, and credit risk assumed by the issuer of CMBS while mortgages are being warehoused during the process of pooling them for ultimate securitization.

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Glossary

All-In Cost

The term applied to the total costs of a securitization. Usually quoted in basis points to reflect what would have been added to the yield if the expenses had not been applied to the creation of a security.

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Glossary

Allocated Loan Amount

The portion of the principal amount of a blanket mortgage associated with each individual property in the loan. See Blanket Mortgage .

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Glossary

Allocation of Realized Losses

The distribution of realized losses among the various classes of certificate holders in a transaction. Losses are recorded at the deal level after losses have occurred on particular loans.

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Glossary

American Council of Life Insurers (ACLI)

A trade association for life insurance companies based in Washington, DC that collects and disseminates data on commercial real estate portfolios held by those companies, including data on mortgage delinquencies. The data represents approximately 80% of all mortgages held by life insurance companies.

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Glossary

Americans with Disabilities Act (ADA), 1990

A federal Act prohibiting public buildings from having architectural and communicational barriers for the disabled.

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Glossary

Amortization

A process of repaying loan principal in a series of payments over a period of time until the debt is paid off; the periodic payment consists of a growing portion of principal and a declining portion of interest over time.

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Glossary

Appraisal Reduction

Following certain events defined in the PSA (typically loan delinquency, appointment of a receiver, declaration of bankruptcy, becoming a modified loan, or becoming REO or other similarly defined events) a new or updated appraisal will be required to determine the property value and whether the new value justifies any further advances by the master servicer. Once received, an appraisal reduction amount is determined which is a mathematical calculation comparing the amount of debt, advances and immediate obligations outstanding to the value of the property (typically at 90% of the new appraised value) plus any cash collateral (i.e. reserves and escrows).  If the value of the property is below the loan balance plus authorized advances, the master servicer may reduce principal and interest advances it makes on that loan (if it is delinquent) when remitting to the Trustee, thereby accruing an Appraisal Subordinate Entitlement Reduction. The Trustee will then reduce payments to the certificate holders accordingly.

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Glossary

Appraisal Subordinate Entitlement Reductions (ASERs)

Structural CMBS feature that estimates expected losses on defaulted loans and prevents payment of current interest on the estimated losses. The Appraisal Reduction Amount is applied as a ratio to the expected loan payment and results in a reduced amount of interest advanced by the servicer (on delinquent loans).  It is designed to limit the amount of interest that are paid to investors on loans where the underlying collateral has declined in value.

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Glossary

ARM

ARM: See Adjustable Rate Mortgage.

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Glossary

ASERs

See Appraisal Subordinate Entitlement Reductions

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Glossary

Asking Rent

Rental rate offered by the landlord to a prospective tenant. The rent paid can be less than the asking rent after tenants negotiate for an actual rental rate and concessions.

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Glossary

Available Funds

All funds available or collected from borrowers, including regular payments of principal and interest, prepayments or servicer advances.

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Glossary

Available Funds Cap

A limit on the amount of interest payable to certificate holders, to the extent of interest accrued on a group or pool of mortgage loans.

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Glossary

Average Daily Rate (ADR)

Total daily revenue divided by the total number of occupied rooms on that day. This measure is typically used for hotels but may also be used for healthcare properties.

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Glossary

Average Life

The time until all scheduled and unscheduled principal payments are expected to have been made. The average life of a CMBS is typically compared to the comparable Treasury or Swap Rate (often an interpolated Treasury or Swap Rate) to determine the expected yield on the CMBS.

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