Agency vs CMBS Apartment Loans: Which Fits Your Building

Short answer

Agency loans from Fannie Mae and Freddie Mac are the usual choice for stabilized 5+ unit buildings: they typically size and price well and stay with one servicer. CMBS conduit loans are pooled into a trust with a master and special servicer, usually exit by defeasance or yield maintenance, and fit buildings, markets or sponsors that agency lenders decline.

The short version

On a clean, stabilized apartment building, an agency loan from Fannie Mae or Freddie Mac is usually the first quote to get. CMBS earns its place when the agency lender says no, or says yes on terms that do not work: a tertiary market, a building with physical or occupancy issues, significant commercial space, or a sponsor with a credit event.

The numbers reflect that. Of the $2.3 trillion of multifamily mortgage debt outstanding at the end of the second quarter of 2026, the Mortgage Bankers Association counts 50% in agency and GSE portfolios and MBS, and 3% in CMBS, CDO and other ABS.

How each one works

An agency loan is made by a lender approved by Fannie Mae (a DUS or Small Loan lender) or Freddie Mac (an Optigo lender) to the agency's published standards. The agency buys or guarantees the loan and usually securitizes it. Your servicer is typically the lender that made the loan, so the people who underwrote you are often the people you call later.

A CMBS conduit loan is made by a bank or finance company to be pooled with dozens of other commercial loans into a trust that sells bonds. Once securitized, the loan is administered by a master servicer for routine matters and a special servicer if something goes wrong, under a pooling and servicing agreement written for bondholders. The lender that originated it is generally out of the picture. Read conduit financing for the structure.

Side by side

Term	Agency (Fannie Mae, Freddie Mac)	CMBS conduit
Who sets the rules	The agency's published guide and term sheets	The originator, then the bond investors and rating agencies
Property fit	Stabilized multifamily; small-loan programs for 5+ units	Broad: weaker markets, mixed-use, harder assets
Small-loan leverage and coverage	Up to 80% LTV and 1.25x on Fannie Small Loans and Freddie Conventional Small	Varies by deal; often sized on debt yield as well as DSCR and LTV
Recourse	Non-recourse with carve-outs	Non-recourse with carve-outs
Borrower entity	Often a single-asset entity	Single-purpose entity with strict separateness covenants
Servicing	Usually the originating lender	Master servicer, then special servicer if trouble
Consents (transfers, leases, easements)	Through the servicer under agency rules	Through the master servicer under the trust documents; can be slow
Prepayment	Yield maintenance or a declining premium on Fannie Small Loans; yield maintenance, then defeasance on Freddie Conventional Small	Commonly defeasance, sometimes yield maintenance
Assumption	Typically allowed with approval	Usually allowed with servicer approval and fees
Supplemental debt later	Agency supplemental loans available	Usually prohibited

The agency small-loan terms come from Fannie Mae's published term sheet and Freddie Mac's Conventional Small launch. CMBS terms vary by originator and by deal, so the CMBS column is the usual shape of a conduit loan, not a rule.

The differences that show up after closing

Getting a yes on a change

Over a 10-year loan, owners ask for things: a new commercial lease, an easement for a utility, a transfer to an estate-planning trust, a partner buyout. With an agency loan, the request goes to your servicer, which applies the agency's rules. With CMBS, the master servicer acts under a pooling and servicing agreement, may need the special servicer's sign-off on major decisions, and charges fees for consents. Ask any CMBS lender what its trust documents require for the changes you can foresee.

Leaving early

Many conduit loans require defeasance to prepay: you buy a portfolio of government securities that replaces the loan's remaining payments, using a consultant, counsel and an accountant. The cost depends on rates at the time and the transaction fees. Fannie Small Loans offer yield maintenance or a declining premium instead. Read defeasance and price it with the defeasance calculator.

Adding debt later

Fannie Mae and Freddie Mac offer supplemental loans that let you take out additional proceeds behind the first loan once NOI grows. Conduit loans usually prohibit additional secured debt, so pulling cash means refinancing the whole loan or adding mezzanine debt where the documents allow it.

When things go wrong

If a loan defaults or is about to, an agency loan stays with its servicer under the agency's loss mitigation rules. A CMBS loan transfers to the special servicer, which works for the bondholders and charges its own fees. Modifications are possible in both, but the process and the people are different.

When CMBS is the better answer

The agency lender declined the building or market, or sized it far below what you need.
The property has significant commercial space, which agency programs limit.
The occupancy or operating history does not meet agency stabilization standards, but the cash flow is real.
The sponsor has a credit or legal history that does not fit the agency box.
You want full-term interest-only at a leverage point the agency will not offer on your deal.

When none of those apply, agency debt usually sizes and prices better on apartments, and you get a simpler relationship after closing.

If your CMBS loan is maturing

The Mortgage Bankers Association reports $200 billion, or 25%, of mortgages in CMBS, CLOs or other ABS scheduled to mature in 2026, against $39 billion, or 4%, of multifamily and health care mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae. If your conduit loan is coming due on a stabilized apartment building, an agency refinance is often the natural takeout. Start early, because a CMBS payoff needs coordination with the master servicer. The maturity playbook and maturity planner lay out the order of work.

Frequently asked questions

Is CMBS or agency better for an apartment building?

For a stabilized apartment building that fits Fannie Mae or Freddie Mac standards, agency debt is usually better: it typically sizes and prices well, stays with one servicer and offers supplemental loans later. CMBS is usually better when an agency lender declines the deal, because of the market, the property's condition or occupancy, commercial space, or the sponsor's history.

Are CMBS loans non-recourse?

Generally yes, for the loan balance, with carve-out guaranties for bad acts such as fraud, misapplied funds, unpermitted transfers and voluntary bankruptcy. The borrower is usually a single-purpose entity with separateness covenants, and breaking those covenants can trigger recourse. Agency loans are also generally non-recourse with similar carve-outs. Have an attorney review the guaranty in either case.

Why is it hard to make changes to a CMBS loan?

Once securitized, a CMBS loan is administered by a master servicer under a pooling and servicing agreement written to protect bondholders. Many decisions need servicer approval, and some need the special servicer as well, each with fees and timelines. The originating lender usually no longer has authority to agree to changes. Agency loans go through one servicer under the agency's rules.

Can I prepay a CMBS loan?

Usually, but often only through defeasance, where you replace the loan's remaining payments with a portfolio of government securities, or with yield maintenance. Many conduit loans also have an open period near maturity when you can prepay without either. Read your loan documents for the lockout, the prepayment method and the open window before planning a sale or refinance.

Can I refinance a CMBS loan into a Fannie Mae or Freddie Mac loan?

Yes, if the property meets the agency's standards for occupancy, condition and operating history, and the agency loan sizes to pay off the CMBS balance plus costs. Coordinate early with the master servicer on the payoff and any defeasance or prepayment requirements, and size the agency loan on the lender's underwritten NOI before committing.