What is the primary function of a Commercial Mortgage-backed Security (CMBS)?

The primary function of a Commercial Mortgage-backed Security (CMBS) is to secure bonds using one or more commercial mortgages as collateral. This structure allows investors to buy shares in a pool of commercial real estate loans, which are then used to back the securities issued. The cash flows from the underlying mortgages, including principal and interest payments, are used to pay the bondholders. This financial instrument helps in lowering the risk for investors as the securities are backed by physical assets, and it also helps to provide liquidity in the commercial real estate market.

In contrast, facilitating individual home mortgages and providing liquidity through personal loan issuance do not pertain to the function of CMBS, as they focus more on residential loans and personal finance rather than commercial real estate. Regulating bank lending processes is outside the scope of what CMBS does, as this is the role of financial regulatory bodies rather than a function of securities backed by commercial mortgages.