Commercial Mortgage-Backed Securities Transactions

By: Colleen A. DeVries, COGENCY GLOBAL on Thu, Oct 14, 2021

[Image] Woman checking boxes off a list on a window. | Closing Checklists For Commercial Mortgage-Backed TransactionsWhen you’re managing the closing of a complex financing transaction like that of a commercial mortgage-backed security, a detail-oriented checklist is your best friend.

Checklists are used by so many people every day to manage tasks, both personal and professional. Atul Gawande, author of The Checklist Manifesto: How to Get Things Right, highlights the power of checklists as written guides that walk us through the key steps of any complex procedure or transaction. Doctors, pilots and attorneys have historically used detailed checklists to ensure that even the smallest action items are accounted for and that the responsible party is identified.

Under conditions of complexity, not only are checklists a help,
they are required for success.” 
Atul Gawande

Across my experience working at a law firm, in-house at a publicly traded company and now at a service company, checklists have long been integral in managing projects. As you can imagine, the quote above from Mr. Gawande resonates deeply with me – especially when it comes to closing checklists for transactions.

Why Use a Closing Checklist?

A closing checklist for a merger or commercial finance transaction can sometimes far exceed 20 pages. Working as a paralegal, managing the items and documents on one of those massive closing checklists, I would clearly outline who was responsible for each item and note which resources/service providers I could rely on for completing or obtaining what I was responsible for, in advance of a closing.

The specificity and attention to detail that a checklist allows for can help ensure that the overarching legal transaction is carefully documented, and all actions are taken to protect the parties in the transaction. A missed UCC securities filing in a commercial real estate transaction, for example, could result in the loss of the priority interest in the collateral securing the lender in the transaction. The consequences can be significant.

Commercial Mortgage-Backed Securities Transactions

Part of my current role at COGENCY GLOBAL is working on financing transactions for Commercial Mortgage-Backed Securities (CMBS). This type of security is secured by a loan on a commercial property. As a service company, we often assist clients with many items that are commonly found on a closing checklist for a CMBS transaction:

  • Submit a Certificate of Formation to form a Delaware LLC as a single purpose entity (SPE) or bankruptcy remote entity (BRE) borrower.
  • Qualify newly formed SPEs/BREs in the state where the commercial property is located.
  • Act as independent manager for the transaction.
  • Support public record searching for UCC filings.
  • Obtain certified charter documents and Good Standing Certificates.

Typically, the attorneys and paralegals we work with note the date they communicate with us for any of these services and the status of the filing(s) or document(s) requested. These actions all feed back into their larger transaction checklist.

In addition, we are also often asked to provide process agent services under the governing law provision of the finance agreements. We are frequently appointed as process agent in the State of New York which is a preferred venue by lenders because of the deep understanding of sophisticated commercial financing transactions and vast legal precedents related to decisions in CMBS and other real estate-based transactions. For more information about the role of a process agent, please see Appointing a Process Agent: The Counterparty’s Perspective.

A Sample CMBS Transaction Checklist

Below is a sample checklist highlighting some of the core actions typically found on a closing checklist for a CMBS transaction. 


Note: This is not intended to be used as a complete closing checklist.

You’ll notice the sample checklist above includes columns designating which party is responsible for a line item, dates marking when an action was taken and a column with notes on an item’s present status. Together, these pieces of information help the closing team track what is happening, including those items covered by service companies.

[Image] Han Solo and Chewbacca Star Wars figurines. | "Even Han and Chewie use a checklist." Jon StewartKeep in mind, your closing checklist is a living document. Deadlines can change and additional documents or actions might be added as the CMBS transaction is negotiated. Closely managing and maintaining your closing checklist as these complex financing transactions proceed is an important key to a successful closing.

Even Han and Chewie use a checklist.
Jon Stewart


This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice. 

Topics: Company Formation and Filing Considerations