In a report published today, Moody’s Investors Service said that the credit quality of Q1 2014 CMBS conduit issuance is similar to that of late 2005 issuance because of “the protection from term default afforded by current debt service coverage ratio levels, and the lower share of interest-only loans.”

“CMBS 2.0 deals are increasingly backed by higher-risk collateral that requires more credit enhancement,” says Moody's director of commercial real estate research Tad Philipp. “The CMBS industry needs to assess the level of collateral risk it will tolerate, and a risk-moderate enhancement profile is preferable for CMBS to be a reliable long-term source of capital.” 

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