Commercial Mortgage-Backed Securities Lending Back, With More Complex Terms

11.12.2013
Daily Journal

Nossaman Partner Karla MacCary was quoted in the Daily Journal article "Commercial mortgage-backed securities lending back, with more complex terms," regarding the rebound of the commercial mortgage-backed securities market and the complex lending documents involved.  Commercial mortgage-backed securities (CMBS) loans, unlike traditional loans, get bundled with other loans and sold as securities to investors.  According to the article, lawyers tell their clients that these loans require more legal work than standard loans, but despite the extra legal costs and risks, borrowers continue to opt for the loans because of their attractive rates, often 1 percent lower than those on traditional loans. 

As an attorney who represents large investors in commercial mortgage-backed securities deals, Ms. MacCary noted, "When a client gets a CMBS loan, it's always so much more in legal fees than if they got a regular bank loan."  She continued, saying, "They're using very good rates.  That's why the clients want to take these loans."

Ms. MacCary explained that such deals with large investors usually require corporate as well as real estate attorneys.  They often need legal counsel from Delaware law firms, and some deals require pricey so-called bankruptcy nonconsolidation options – clauses that say the asset won't be consolidated with other assets if the borrower goes bankrupt.

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