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BofA Sees Moody’s Shift as Slippery Slope for Real Estate Bonds

At a time of increasingly risky lending in the commercial-mortgage market, Moody’s Investors Service appears to be backtracking on its role as guardian of bond investors, according to Bank of America Corp.

The credit-rating giant surprised the market last week with plans to change the way it calculates default risk in a type of commercial mortgage-backed security. The changes by Moody’s will make it easier for “marginal” firms to borrow potentially excessive amounts based on the values of their buildings, according to Bank of America analyst Alan Todd.