Key credit metrics in the commercial mortgage-backed securities market weakened further in the second quarter, according to Moody's Investors Service.The debt service coverage ratio, a measure of cash flow available to pay off debt on commercial mortgage loans, declined to 1.26, one of the lowest levels in recent years. In addition, the loan-to-value ratio on the deals rated by Moody's was up more than 5% for the second quarter in a row to reach a record 117.0. This came about in an environment of "record low" capitalization rates used in underwriting, Moody's said. Furthermore, the share of interest-only loans reached a new high of 87.4% in the second quarter. In April, Moody's had initiated tighter credit policies for CMBS deals it rates, following a few years of declines in underwriting. The rating agency said it believes that it has lost deals to competitors following the move, reporting that it will not be rating eight of the first 12 CMBS deals following the implementation of its adjustment. The rating agency can be found on the Web at http://www.moodys.com.

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