The commercial mortgage-backed securities market has changed the legal structure of commercial real estate finance in the United States. By transforming the market from whole loan participation to participation based on subordinated securities, the economic and legal goals and limitations in the event of borrower default are likewise transformed. Not only have the holders of real estate debt changed, but the documents underlying the transaction have also evolved. This article analyzes how these changes may affect the rights and obligations of the parties in the event of a real estate downturn. The new structure uncouples traditional debt-oriented rights from risk of investment loss. Several methods to minimize such a disjunction are suggested.
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