True or False: Commercial mortgage-backed securities (CMBS) are bonds secured by commercial mortgages.

The statement is true because commercial mortgage-backed securities (CMBS) are indeed bonds that are secured by a pool of commercial mortgage loans. These securities are created through the process of securitization, where various commercial mortgages are bundled together and then sold to investors in the form of bonds. The cash flow generated from the underlying mortgages, such as the principal and interest payments made by borrowers, is used to pay interest and principal to the bondholders.

By being secured by commercial mortgages, CMBS offer a degree of protection to investors, as the underlying assets can be liquidated in case of defaults, providing a potential recovery of funds. This distinguishes them from unsecured securities, which have no underlying collateral to support them in case of non-payment.

Other options mentioned do not accurately reflect the nature of CMBS. For instance, stating that they are only for residential mortgages misrepresents their primary focus, which is on commercial real estate. Additionally, classifying them as unsecured securities fails to acknowledge the security offered by the underlying commercial mortgages.