11.24.17: The CMBS Loan Agreement Is Your Road Map

I get many calls from clients asking whether they can do this or that under the terms of their CMBS conduit loan. I do the research and answer their questions. Where do I find the answers? In the CMBS Loan Agreement! At the closing of a CMBS conduit loan, one of the loan documents executed by the borrower is the Loan Agreement. This 100-plus page document provides complete instructions on how to manage your CMBS conduit loan.

Granted, the document is written in legalese and can be a little difficult to interpret. However, the document begins with roughly 30 pages of definitions, written such that the concepts are reasonably understandable. Within the definitions are loan basics such as the interest rate, maturity, monthly payment and amortization. But many complex items can also be found in the definitions — the definition of yield maintenance, restoration threshold for a casualty, definition of permitted transfers and definitions for pretty much every other item that might come up during the term of the loan, for example.

After the definitions, the Loan Agreement has 10-12 Sections, some of which are very relevant to complying with the terms of the loan:

  • Financial Reporting – type of financial reports and timing;
  • Property Alterations – dollar limits on improvements without lender consent;
  • Insurance: Casualty and Condemnation – how to handle insurance claims;
  • Reserves and Escrows – how they are determined and released;
  • Property Management – how to replace a property manager; and
  • Transfers – the procedure to complete an assumption – to mention a few.

The CMBS Loan Agreement is always provided to the borrower in soft copy. It provides the road map for what to do to comply with the terms of the loan. It’s a very good idea to keep it handy.

This entry was posted in CMBS, CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , . Bookmark the permalink.

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