Commercial mortgage-backed securities (CMBS) are at the heart of what caused the credit crunch. It is tempting to consider that the relaunch of a more regulated CMBS market might rescue us, and provide much-needed capital to an indebted commercial UK property market.CMBS derive a return from a pool of loans secured on commercial property that were lent initially by a bank from its own balance sheet resources. The loans are repackaged as bonds to the investors, who buy the right to receive interest on them, along with the right to repayment. The banks remove the loans from their own balance sheets, while earning fees forthe set-up and a skim of the interest paid.
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