Check all true statements regarding CMBS:

a. CMBS have less exposure to prepayment risk than RMBS

b. Loans in a CMBS deal are recourse loans The multifamily/apartment CRE sector never uses CMBS for financing as it relies on RMBS

c. CMBS are the main source of financing for commercial real estate loans

d. The number of commercial mortgages in a CMBS deal are usually lower than the number of residential mortgage in a RMBS deal

a.CMBS have less exposure to prepayment risk than RMBS

d. The number of commercial mortgages in a CMBS deal are usually lower than the number of residential mortgage in a RMBS deal

Explanation:

Commercial Mortgage-Backed Securities (CMBS) as the name implies are mortgage backed securities that are secured with commercial mortgages while Residential Mortgage-Backed Securities (RMBS) are mortgage backed securities secured by residential property.

a) CMBS are based on mortgages which usually have a fixed term contract in place meaning that prepayment is less of a thing with CMBS than with RMBS so the former does indeed have a less exposure to prepayment risk than the latter.

d) This is indeed true because both packages have to look appealing to investors but can only use different amounts to reach the minimum threshold. This is because Commercial Mortgages pay more than Residential Mortgages so more RMBS have to be pulled together to form an attractive investment as opposed to CMBS. This is why the number in CMBS are usually less than that of RMBS.

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