Poorly designed MBS (Mortgage-Back Securities) were the second most important direct reason for the housing and economic collapse behind highly inaccurate ratings by rating services, such as Moodys, who rated toxic tranches as AAA. Fortunately, Moodys appears to have learned its lesson to some degree. Let's hope they continue reporting on negative trends, as with this latest report from them about loans packaged into MBS, in this case, Commercial MBS (hence: CMBS).
As the recovery continues for commercial real estate, conduit lenders are opening the taps—tempting borrowers with risky levels of leverage, according to Moody’s Investors Service.
“As the lending market continues to ramp up, competition among issuers will lead to a further decline in credit underwriting standards,” according to Moody’s “US CMBS 2013 Outlook: Credit Quality of New Loans to Slip But Not to Peak Levels.”
Read the whole article (opens in a new tab so you may easily comment here): More Leverage for Conduit Loans, Says Moodys.