Understanding CMBS bond structure
Does anyone on here have a working knowledge of CMBS bond structure? I am trying to get a handle on where to locate information on how these notes are structured. For instance, if I was to pull a title report on a property financed through a CMBS mortgage, it generally pulls up just the total financed amount. What is confusing is that I know there are separate pieces of that note, (Ie several mezz portions have traded, yet they do not show up on title as separate loans). My understanding is that they are all rolled up in the original mortgage, and then there is an intercreditor agreement as to how things should proceed in the event of default/foreclosure/etc. Beyond that I am somewhat lost.
Honestly I've got a more fundamental question about MBS bonds too - actual mortgages are amortized with principal and interest. How is this reflecting in MBS bonds, since the vast majority of bonds usually have interest only coupons with a full bullet principal repayment at the end?
Work in CMBS, happy to answer if you’re still interested.
Hey, I'm the same guy as above who asked about the MBS - I'd love to learn about this.
For example, since MBS amortize principal, is investing in MBS more like investing in loans rather than actual bonds?
And how these bonds actually priced if they're amortizing? It's relatively simple with bonds - find the PV of expected cash flows using the YTM. However, with a loan where we don't know about prepayment, how are prices quoted? Do you find the PV of cash flows if there was no prepayment?
Thanks!
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