How CMBS bonds get rated, and how the ratings reach your loan

A CMBS rating is a credit rating agency’s opinion of how likely one class of bonds is to receive its interest and principal as promised. Agencies re-underwrite each loan’s cash flow and value, model losses across the pool, and set how much subordination each rating level needs. The issuer picks the agencies: BANK5 2025-5YR14 consulted five and hired three.

Who rates CMBS, and where their methods are published

Rating agencies are registered with the SEC as nationally recognized statistical rating organizations (NRSROs). Those active in CMBS publish their criteria:

Agency	Public criteria for multi-borrower (conduit) CMBS
Fitch Ratings	U.S. and Canadian Multiborrower CMBS Rating Criteria, listed on Fitch’s criteria page and CMBS sector page
KBRA	North American CMBS Multi-Borrower Rating Methodology, with a separate Property Evaluation Methodology
Moody’s	US and Canadian Conduit/Fusion CMBS Methodology
Morningstar DBRS	North American CMBS Multi-Borrower Rating Methodology
S&P Global Ratings	CMBS Global Property Evaluation Methodology, with guidance

Each agency revises its criteria from time to time; check the current version on its site. Single-asset, single-borrower deals are usually rated under separate criteria for large loans.

How an agency rates a conduit deal

The details differ by agency, but the method has the same bones:

1. Re-underwrite the cash flow. The agency builds its own sustainable net cash flow for each loan (or a sample of loans), typically below the issuer’s underwritten figure, normalizing vacancy, expenses, capital reserves and lease rollover.
2. Value the property its own way. It applies its own capitalization rate to that cash flow to reach a value well below the appraisal in most cases, and from it computes an agency LTV and DSCR.
3. Estimate default and loss. Agency leverage and coverage drive each loan’s modeled probability of default and loss severity, adjusted for property type, market, sponsor, loan structure (amortization, cash management, reserves) and legal features.
4. Look at the pool. Concentration (few large loans, one property type, one market, one sponsor) raises required credit support; diversity lowers it.
5. Size the stack. The result is the subordination each rating level needs: the share of the pool that must sit beneath a class for it to earn that rating.
6. Review the structure and parties. Servicer quality, the waterfall, advancing, and the transaction documents.

In BANK5 2025-5YR14 the senior classes ended with 30% credit support (prospectus, “Summary of Certificates”); the stack is laid out on CMBS tranches.

Ratings shopping, disclosed

Issuers pay for ratings and choose the agencies. The BANK5 2025-5YR14 prospectus puts it plainly in its “Ratings” risk factor: “the depositor had initial discussions with and submitted certain materials to five NRSROs,” then hired three of them (Fitch, KBRA and Moody’s) and not the others “due, in part, to those NRSROs’ initial subordination levels.” In other words, the agencies that wanted more credit support under the bonds were not hired. It was a condition of issuance that the offered classes, other than Classes X-B, B and C, receive investment grade ratings from the three hired agencies.

Two safeguards sit alongside that choice. Under SEC Rule 17g-5, information the issuer gives the hired agencies is posted to a website that other NRSROs can use to issue unsolicited ratings; in this deal the certificate administrator is the “17g-5 information provider.” And the prospectus warns that an unsolicited rating lower than the hired agencies’ ratings “may adversely impact the liquidity, market value and regulatory characteristics” of a class.

After the deal: surveillance and rating agency confirmations

Agencies keep monitoring the bonds and may upgrade or downgrade classes as loans pay, default or recover. Two things reach the borrower:

• Rating agency confirmations. Some actions, under the loan documents or the PSA, require written confirmation from each agency that the action will not cause a downgrade, withdrawal or qualification of its ratings. Requests of this kind can come up on assumptions, additional debt, property manager changes or servicer replacements, depending on the loan and deal. In BANK5 2025-5YR14, if an agency does not respond within 10 business days of a request being posted, the requester must confirm receipt and ask again; if there is still no response within 5 business days, the confirmation requirement is generally deemed not to apply and the servicer may proceed if the action is consistent with the servicing standard (prospectus, “Rating Agency Confirmations”).
• Pool-level pressure. Downgrade risk on the junior classes makes the controlling class and special servicer more cautious in workouts. That shows up in how special servicing treats a modification request.

What ratings mean for your loan

• Conservative sizing. The agencies’ haircuts to your property’s income and value set how much subordination the bonds need. Lenders who expect a loan to cost the deal extra credit support price it higher or size it smaller. See CMBS underwriting, debt yield and DSCR.
• Standardized documents. Agencies give credit for features like hard or springing lockboxes, reserves, single-purpose borrowers and non-consolidation, so those features appear in nearly every CMBS loan. See CMBS loan terms and cash management.
• Time on some requests. A confirmation adds days to an assumption or other consent; plan for it on CMBS loan assumption and servicer consent.

Related: CMBS primer, the securitization process, CMBX, glossary.

Sources: BANK5 2025-5YR14 prospectus (424B2, filed April 2, 2025): “Ratings” and the related risk factor on NRSROs, “Rating Agency Confirmations”, “Summary of Terms” (Certificate Administrator as 17g-5 information provider), “Summary of Certificates”; rating agency criteria pages as linked. The method summary describes the common structure of the published criteria; each agency’s own document governs its ratings.