The correct answer is D.

A Commercial Mortgage-Backed Security (CMBS) is indeed a non-recourse loan to the issuer and is fully secured by the underlying property asset. This means that the issuer, typically a business entity, is not personally liable for the loan. The lender's only recourse in the event of a default is the property that serves as collateral for the loan. This is a key characteristic of CMBS and differentiates it from Residential Mortgage-Backed Securities (RMBS), where the loans are typically recourse loans and the borrower is personally liable. The non-recourse nature of CMBS reduces the risk for the issuer, as they are not personally liable and their other assets are not at risk if they default on the loan. However, it increases the risk for the lender, as they may not be able to recover the full amount of the loan if the property's value decreases.

Choice A is incorrect. This statement is not accurate because a CMBS is not a recourse loan to the issuer and it is indeed secured by the underlying commercial property or properties. The issuer cannot be held personally liable if the loan defaults.

Choice B is incorrect. While it's true that a CMBS is non-recourse, this choice incorrectly states that only half of it is secured by the underlying asset. In reality, a CMBS loan would typically be fully secured by the underlying asset.

Choice C is incorrect. This choice inaccurately describes a CMBS as being only partially secured and being a recourse loan to the issuer, which contradicts with its actual structure where it's fully secured and non-recourse in nature.

Things to Remember

• RMBS vs. CMBS: Residential Mortgage-Backed Securities (RMBS) are backed by residential properties, whereas CMBS are backed by commercial properties.
• Non-Recourse Loan for CMBS: In the case of CMBS, the loan is non-recourse to the issuer, meaning the issuer isn't personally liable. The loan is fully secured by the property itself.
• Importance of DSCR: For CMBS, the Debt Service Coverage Ratio (DSCR) is critical for assessing credit risk. DSCR measures the cash flow available to pay current debt obligations, indicating the ability of the property to cover its mortgage payments.