CMBS Loans and the HUD 223(f) Program
CMBS loans are commercial and multifamily real estate loans that are pooled into securities and sold to investors on the secondary market. CMBS stands for commercial mortgage backed security. These securities may consist of loans for properties such as hotels, apartment buildings, office buildings, hospitals, or other types of income-producing commercial real estate assets. Unlike HUD 223(f) loans, which are fully amortizing loans with 35-year terms, most CMBS loans are partially amortizing and have 5,7, or 10-year terms. This means that borrowers will either have to refinance the loan or pay a hefty balloon payment at the end of the loan’s term.
In general, CMBS loans are much easier to get approved for than HUD 223(f) loans. Unlike 223(f) loans, which require a borrower to have a strong financial history and great credit, CMBS loans are asset based, which means that as long as the property hits the right LTV and DSCR requirements, it will usually be approved for a loan.