Conduit loans
By Brad Beattie, Director, Capital Markets, Janover Capital LLC · Published
A conduit loan is a commercial mortgage a lender makes in order to sell it into a CMBS trust alongside many other loans. The lender is a conduit between the borrower and bond investors. Conduit loans are fixed rate, non-recourse, usually five or ten years, and written on standardized documents so a pool of them can be rated and sold.
Anatomy of a conduit deal
The BANK5 2025-5YR14 trust is a representative five-year conduit deal (prospectus, filed April 2, 2025; pooling and servicing agreement):
| Role | Who | What it does for your loan |
|---|---|---|
| Mortgage loan sellers (sponsors) | Wells Fargo, Morgan Stanley, JPMorgan Chase, Bank of America | Originated the 25 loans ($884.4 million) and sold them to the trust |
| Depositor | Wells Fargo Commercial Mortgage Securities, Inc. | Bought the loans and transferred them to the trust |
| Master servicer | Trimont LLC | Collects payments, holds reserves, handles routine borrower requests |
| Special servicer | Torchlight Loan Services, LLC | Takes over loans in default or about to default |
| Operating advisor and asset representations reviewer | BellOak, LLC | Oversees the special servicer for bondholders; reviews loan representations if delinquencies trigger it |
| Risk retention holder (B-piece buyer) | TL DF8 RR, LLC | Bought the first-loss classes, about 5.03% of fair value; affiliated with the special servicer |
Not every loan in the pool is serviced by this trust. Large loans are split into pari passu notes and spread across several deals, and the co-lender agreement names one lead servicer. In this pool, the Grand Plaza loan is serviced under the MSBAM 2025-5C1 agreement, and The Spiral under the Hudson Yards 2025-SPRL single-borrower deal. If your loan is split, the servicer you deal with may sit in a different trust from the note in your statement. Master servicer, special servicing.
How a conduit pool gets built
- Origination on standard terms. Each lender closes loans on documents built for securitization: a single-purpose borrower, cash management, reserves, and prepayment by defeasance or yield maintenance.
- Warehousing. The lender carries each loan on its own balance sheet until the deal prices, and hedges its rate risk in the meantime. That spread risk is part of why conduit lenders are strict about closing on schedule.
- Pooling. Several lenders combine loans into one pool for diversity by property type and geography. CMBS securitization process.
- Kick-outs. The B-piece buyer reviews every loan before the deal prices and can ask to remove loans it does not want. Federal rules require a third-party purchaser to conduct “an independent review of the credit risk of each securitized asset” (17 CFR 246.7(b)(4)).
- Rating and sale. Rating agencies size the bond classes and investors buy them. CMBS ratings, tranches.
Why conduit documents are so standardized
Each loan seller makes dozens of representations and warranties about every loan it sells (title, lien priority, insurance, environmental condition, single-purpose entity covenants and more), listed in the prospectus’s Annex D-1, with loan-by-loan exceptions disclosed in Annex D-2. A material breach obliges the seller to cure, repurchase or replace the loan. That repurchase risk is why a conduit lender resists custom terms: every change from its standard is a potential exception it must disclose, and a reason a B-piece buyer might kick the loan out.
Five-year and ten-year conduits
Conduit programs are organized by term. BANK5 is a five-year program: the loans in BANK5 2025-5YR14 had about 59 months remaining at cut-off. Other programs pool ten-year loans. Across all public conduit and SASB deals, the current split between five- and ten-year terms is on CMBS loan terms.
Conduit, SASB and balance sheet loans
| Conduit loan | SASB loan | Balance sheet loan (bank, life company) | |
|---|---|---|---|
| Who holds it | A trust with many other loans | A trust holding one loan or one borrower’s portfolio | The lender |
| Typical size | Mid-size and larger | Large | Any |
| Rate | Fixed | Often floating | Fixed or floating |
| Servicing | Master and special servicer | Master and special servicer | The lender |
| Flexibility after closing | Low | Low to moderate | Highest |
| Recourse | Non-recourse with carve-outs | Non-recourse with carve-outs | Banks often recourse; life companies usually not |
More: SASB loans, CMBS vs bank loans, CMBS vs life company loans.
What it means for you as a borrower
- You will deal with servicers, not the lender. Consent requests, reserve draws and payoff quotes go to the master servicer under the pooling and servicing agreement. CMBS servicer consent.
- Your loan is public. Its monthly performance is filed with the SEC loan by loan. Our CMBS statistics are built from those filings.
- Changes are hard. The REMIC rules limit modifications of performing loans (26 CFR 1.860G-2(b)), so negotiate at the term sheet. What a servicer can modify.
- The lender that closed your loan matters less after closing than the trust it lands in. Who your special servicer would be.
To see who is making conduit loans now, by volume and property type, visit CMBS lenders. To start one, read how to get a CMBS loan.
Questions people ask
Why is it called a conduit loan?
Because the lender is a pass-through. It originates the loan intending to sell it into a CMBS trust, so the money really comes from bond investors and the lender is the conduit between them and the borrower.
Is a conduit loan the same as a CMBS loan?
Most CMBS loans are conduit loans: loans pooled with many others from several lenders into one trust. A CMBS loan can also be financed alone in a single-asset, single-borrower (SASB) deal. People often use "conduit loan" and "CMBS loan" interchangeably.
Who makes conduit loans?
Large banks and specialty finance companies that run securitization programs. The lenders behind recent public CMBS deals, ranked by volume from SEC filings, are on our CMBS lenders page.
Can a conduit loan be modified after closing?
Only within limits. The master servicer can approve routine matters; significant changes to a performing loan are restricted by the REMIC tax rules and the pooling and servicing agreement, and many need the controlling class to agree. Modifications are mainly available when the loan is in or near default.
Get a CMBS quote
Buying or refinancing stabilized commercial property? Send the deal to Janover Capital LLC and a capital markets advisor will reply within one business day.