My impression is that commercial loan securitization is a little different.
When you’re talking about residential mortgages, you’re talking about loans of a few hundred thousand, which is kind of too small for capital markets to bother. So the banks bundle them, like you say, and sell them in $1e8-1e10 offerings… Pension fund’s gotta park $100,000,000 somewhere, and that MBS is easier than actually managing 500 separate loans.
When you’re talking about commercial real estate - and especially things as big as data centers - it’s the opposite problem. They need such big loans that only a big bank or even consortium of big banks can get all the capital together, then the big bank turns the loan into a bond offering, so investors can buy them in slices as small as $1e4… That bond may only have one or two loans in it, so it can’t necessarily get broken into risk tranches like the MBS.
My impression is that commercial loan securitization is a little different.
When you’re talking about residential mortgages, you’re talking about loans of a few hundred thousand, which is kind of too small for capital markets to bother. So the banks bundle them, like you say, and sell them in $1e8-1e10 offerings… Pension fund’s gotta park $100,000,000 somewhere, and that MBS is easier than actually managing 500 separate loans.
When you’re talking about commercial real estate - and especially things as big as data centers - it’s the opposite problem. They need such big loans that only a big bank or even consortium of big banks can get all the capital together, then the big bank turns the loan into a bond offering, so investors can buy them in slices as small as $1e4… That bond may only have one or two loans in it, so it can’t necessarily get broken into risk tranches like the MBS.