PT  - JOURNAL ARTICLE
AU  - David P. Jacob
AU  - Frank J. Fabozzi
TI  - The Impact of Structuring on CMBS Class Performance
AID  - 10.3905/jpm.2003.319910
DP  - 2003 Aug 31
TA  - The Journal of Portfolio Management
PG  - 76--86
VI  - 29
IP  - 5
4099  - https://pm-research.com/content/29/5/76.short
4100  - https://pm-research.com/content/29/5/76.full
AB  - The structure of a commercial mortgage-backed security–the combination of the characteristics of the underlying loans and the design of the cash flow algorithm that creates the bond classes–can affect the performance of the various bond classes. In a simple pass-through, the affects on the resulting bonds are fairly straightforward. Any resulting complications are a function of the lack of homogeneity of the characteristics of the underlying loans. More typical senior/subordinated multi-class structures with several interest-only bond classes often lead to some less-than-intuitive performance results for the bonds, especially when combined with heterogeneous collateral. In this article, the authors explain the impact of structuring on the bond classes of a CMBS structure. They explain why while there are some similarities between the structuring of commercial and residential mortgage pools, the differences in the features of the underlying loans lead to different considerations in creating commercial versus residential mortgage-backed securities.