For lenders looking for the next holy grail in the CMBS market, JPMorgan Securities' CMBS group has one suggestion: construction loans. While attempts have been made in the past to securitize these entities, the firm says the timing is right but do the rating agencies agree?

"The CMBS market has matured. It's been around for 10 years, there is a history of performance, a wide investor base and structures have evolved. Securitizing construction loans is the next frontier," said Steven Schwartz, managing director and co-head of the CMBS group at JPMorgan and the first bank to say publicly it is exploring ways to securitize construction loans for the market. "I hope it is a 2005 event but there is still a lot of wood to chop."

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