A financial intermediary that serves as a connection between a lender(s) originating loans and the ultimate investor(s). A conduit extends loan or purchases loans from third parties, based on a set of standard parameters. The loans will be pooled, subject to a feasible volume, and then sold to investors in the asset-backed securities (ABS) market.
For example, CMBS loan origination (loan underwriting) involves h a conduit lender evaluating and processing a borrower’s commercial loan application. The loan will be extended if both parties agree on the terms of the loan (known as the conduit loan). Conduit financing is a type of financing that is based on fixed-income securities as collateral.
Conduits are specialist entities formed by banks or other financial institutions to extend financing for firms or fund investments.
