Agency loan or CMBS conduit loan

What actually separates them

An agency loan is underwritten to a published program with fixed leverage and coverage limits: Fannie Mae DUS lends to 80% max LTV at 1.25x min DSCR. A conduit loan is underwritten to what a pool of bond buyers and rating agencies will accept, which shows up as lower leverage and higher coverage. The pools tell the story: one August 2026 conduit, MSBAM 2026-C36, priced at 54.3%³ LTV and 2.17x³ coverage on average. CRED iQ put the average 2026 conduit multifamily loan at 62.0%⁴ LTV.

So on apartments, the agency usually sizes larger. CMBS answers a different question: how much interest-only, non-recourse debt will the cash flow carry on a property the agencies do not finance at all?

One 160-unit building, two sizing models

Illustration. A stabilized 160-unit property is worth $26,000,000 and underwrites to $1,560,000 of NOI, a 6.0% cap rate. Assume an agency quote of 5.90% fixed for 10 years on a 30-year schedule. For CMBS, use this site’s indicative multifamily rate, the 10-year Treasury at 4.94% (October 30, 2026) plus CRED iQ’s multifamily spread of 154 bps, or about 6.48%, full-term interest-only, with an illustrative conduit leverage limit of 65% and a 9% debt yield floor.

Sizing (illustration)	Agency	CMBS conduit
Leverage limit	80% = $20,800,000	65% = $16,900,000
Coverage limit at 1.25x	about $17,534,000 on the amortizing payment	about $19,259,000 on the interest-only payment
Debt yield floor	not a program test	9% = about $17,333,000
Loan offered	about $17,534,000	about $16,900,000
Annual debt service	about $1,248,000	about $1,095,000
Cash flow after debt service	about $312,000	about $465,000
Balance after 10 years	about $14,634,000	$16,900,000

The agency lends about $634,000 more and retires about $2,900,000 of principal over the term. The conduit loan leaves about $153,000 a year more cash in the owner’s pocket and nothing paid down. Which is better depends on whether you value current yield or equity at maturity. The conduit’s coverage on this loan works out to about 1.42x and its debt yield to about 9.2%, so leverage, not cash flow, is what limits it.

Exit costs: where the two diverge most

Agency. Fannie Mae’s fixed-rate default is yield maintenance, with a declining premium available. Its schedule on a 10-year loan: 10-year fixed: 5-5-4-4-3-3-2-2-1-1, no lockout⁷. Freddie’s large-loan structure: Yield maintenance until securitized, then 2-year lockout and defeasance; open final 90 days⁸.

CMBS. Most conduit loans are locked out and then defeased. The trust tax rules set the timing: CMBS loans can defease only after at least 2 years from the securitization closing, not the loan closing⁹. To defease, you buy a portfolio of government securities that replicates every remaining payment. Defeasance collateral must be non-callable government securities⁹. The borrower pays rating agency fees and the other expenses of defeasance⁹. One recent five-year pool shows the mix: 57.5% of the pool (24 loans) is lockout then defeasance; 25.6% (8 loans) allows yield maintenance⁹.

When Treasury yields are above your note rate, the replacement securities are cheap and defeasance costs little beyond its fees. When yields are below the note rate, the securities cost more than the balance, and an assumption by your buyer is often the better exit.

The costs people miss

• CMBS cash management. Conduit loans commonly add a lockbox and cash sweep that trap cash if coverage or debt yield falls below a trigger. Read the trigger levels, not only the rate.
• CMBS servicing. After closing you deal with a master servicer and, if the loan gets into trouble, a special servicer. Requests that a portfolio lender settles in a week, such as signing off on a lease or a partial release, run through a servicing process with fees.
• Agency reserves. Agency loans collect replacement reserves monthly, sized from the property condition report.
• Agency caps. FHFA limits each agency’s market-rate lending: $88 billion each for Fannie Mae and Freddie Mac (2026)¹⁰. Pricing on non-mission deals can widen late in a year.
• Rate lock timing. Fannie Mae offers 30- to 180-day rate lock commitments¹¹; a conduit lender typically locks closer to closing and prices to where its bonds will sell.

Where CMBS wins

• Non-multifamily property. For retail, office, industrial, hotel and self-storage, the agencies are not an option. CRED iQ’s March 2026 spreads by type: multifamily 154 bps, industrial 162 bps, retail 176 bps and office 220 bps.
• Interest-only cash flow buyers. If your return depends on current yield and you plan to sell before maturity to a buyer who assumes the loan, the conduit structure fits.
• Mixed-use with a heavy commercial share. When retail or office rent is too much of the income for agency guidelines, a conduit underwrites the whole property.

Where the agency wins

• Stabilized apartments where proceeds matter.
• Long holds where amortization builds equity you will refinance against.
• Owners who want a declining premium instead of defeasance.
• Sponsors who expect to add a supplemental loan later instead of a mezzanine piece.

If you have a stabilized property and are weighing both, send the rent roll and operating statements. We will price the agency and conduit routes on the same NOI.