Assumption Parties and Terms



Borrower (Original Borrower):
The original borrower (seller) is the entity originally responsible for paying back the CMBS loan. Once the assumption process is complete, the seller is able to finalize the sale of its property and transfer its loan obligations to the buyer (new borrower).
Controlling Class Representative (CCR):
The CCR is the investor in the most subordinate bond classes within a CMBS pool. Since losses come out of the subordinate classes prior to other classes, the CMBS trust documents provide the CCR the opportunity to play an active role in monitoring the loans and the ability to appoint and/or terminate the Special Servicer. Also known as the Directing Certificateholder.
New Borrower:
The new borrower, or buyer, purchases the property and assumes the CMBS loan from the seller. In order to comply with the governing documents of the CMBS pool, the new borrower must create a Special Purpose Entity to hold the assumed loan.
Rating Agencies:
The agencies that examine the CMBS pools and assign credit ratings based on the quality of the underlying collateral (commercial properties) that secures the pools. In addition, they review assumptions of certain loans (usually large loans) to ensure there will not be any negative impact on the pool (see No-Downgrade Letter). The four Rating Agencies are Dominion Bond Rating Service (DBRS), Fitch Ratings, Moody's Investors Service, and Standard & Poor's (S&P).
Master Servicer:
The Master Servicer is the bank or financial entity that manages the loans in a CMBS pool on behalf of the certificateholders, collects monthly payments from borrowers, and handles any borrower requests or prepayments. The Master Servicer is generally the party that processes assumption requests and serves as the main point of contact for the buyer and seller.
Primary Servicer:
The Primary Servicer, often the loan originator, is the first point of contact for the borrower that handles billing statements and initial questions and requests. The Primary Servicer is typically only involved in the assumption review process if the loan is subserviced.
Special Servicer:
The Special Servicer manages defaulted or non-performing loans for the Master Servicer and reviews assumptions and other special requests. The Special Servicer typically reviews the assumption package after the Master Servicer has given its consent.


The owners of the certificates (bonds) of a CMBS pool.
Commercial Mortgage-Backed Securities (CMBS):
Securities backed by a pool of commercial loans that have been packaged into a REMIC trust. All of the principal and interest payments from the CMBS loans are passed through the trust to the Certificateholders. CMBS loans pooled into a REMIC are also known as "Conduit" loans or "Securitized" loans.
CMBS Trust:
See Real Estate Mortgage Investment Conduit (REMIC).
The new borrower is required to have a guarantor and/or indemnitor sign off on their loan in order to protect the CMBS trust. The guarantor signs a guaranty to protect the trust from any “bad acts” which may occur during the loan period. The indemnitor signs an agreement to protect the trust from any environmental hazards on the property. Typically, the indemnitor and the guarantor are the same.
No-Downgrade Letter:
A letter the rating agencies issue at the end of their review of an assumption to confirm that the assumption will not cause a rating downgrade in the CMBS pool.
Real Estate Mortgage Investment Conduit (REMIC):
A REMIC is a bankruptcy-remote legal entity formed to hold a pool of CMBS loans and facilitate the pass-through flow of funds between Borrowers and Certificateholders. REMICs are conduit trusts structured to avoid taxation and regulatory restrictions. Also known as a CMBS trust.
Special Purpose Entity (SPE):
A bankruptcy-remote entity established by a borrower for the sole purpose of holding the underlying CMBS property. It prevents the property from being involved in any bankruptcy proceedings against the borrower.
A class of certificates (in a CMBS pool) distinguished from other classes by its credit rating and rate of return (coupon rate). A CMBS pool is structured so each tranche offers varying degrees of risk/reward to investors. Higher rated (senior) tranches are safer investments than lower rated (subordinate) tranches as they are paid down before subordinate tranches. However, subordinate tranches offer a higher rate of return than senior tranches.