TY - JOUR T1 - CMBS Credit Protection and Underwriting Standards JF - The Journal of Portfolio Management SP - 80 LP - 90 DO - 10.3905/jpm.2005.593890 VL - 31 IS - 5 AU - David P. Jacob AU - James M. Manzi Y1 - 2005/09/30 UR - https://pm-research.com/content/31/5/80.abstract N2 - Credit-enhancing features and underwriting standards in commercial mortgage-backed securities (CMBS) transactions have evolved over time since the market developed in the early 1990s. With the positive performance of commercial real estate, the boom in capital flowing into the sector, and competition among new entrants to the market, lenders have become more flexible with regard to loan terms, enabling CMBS to be sold at reduced credit enhancement levels. The competition among market players, old and new, suggests that the trend toward more relaxed lending standards may not reverse itself any time soon (not a concern as long as investors are compensated for the additional risk). While these trends are not unique to CMBS, the best strategy for an investor who has to be in the bond markets (short of moving into Treasuries) is to compare spreads across different sectors and adjust for credit enhancement and expected credit experience. ER -