A conduit lender takes a collection of single mortgage loans then combines it into one securitized pool. After an amount of loans are originated, generally a minimum of $500 million, it is then pooled together. This pool is then structured into multiple tranches, with different credit ratings for each traunch. After ratings are established, the pool of loans is then sent to the bond market to be sold to investors.
Because of the unique nature of this process, conduit loans tend to be more very complex. CMBS loans almost always contain lockout provisions known as defeasance. Whereas life companies loans usually contain a lockout provision known as yield-maintenance.
Participants in the process include: a Primary servicer, Master servicer, Special servicer, Trustee, and a Rating agency.