For years, a look at the secondary markets for single-family and commercial real estate loans was a study in contrasts. Backed by such titans as Fannie Mae, Freddie Mac, and the Department of Housing and Urban Development, the secondary market for residential mortgages skyrocketed in the 1980s, and today exceeds $3 trillion.

Commercial mortgage loans, which were larger and more complex than home loans, proved harder to securitize. Lacking uniformity and the safety net of implicit federal guarantees enjoyed by some mortgage-backed securities, commercial mortgages were originated and then sat on a lending institution's books.

When the loans soured, the lenders suffered. In the case of the S&Ls, many failed because of poor commercial real estate credit.

The environment is changing. Though the scale of commercial mortgage securitization still pales in comparison with the huge market for residential-mortgage-backed securities, it is growing fast.

Last year a record $30.4 billion in commercial-mortgage-backed securities was issued, according to Commercial Mortgage Alert, an industry newsletter.

That was a 60% jump over 1995, and 50% more than the previous record, $20.3 billion, which was set in 1994. In five years, total volume has grown from near zero to almost $125 billion.

Simultaneously, rated commercial real estate debt securities have proved popular with fixed-income investors. High yields, prepayment lock-outs, and the security of a credit rating offer an attractive alternative to government and corporate bonds.

And as with other securities, debt secured by real estate can be split into various pools of risk, return, and duration, then matched to the needs of investors.

Originally, commercial mortgage securitization was driven by the Resolution Trust Corp.'s desire to resolve the S&L crisis and liquidate billions in troubled loans. Since 1994, however, commercial-mortgage-backed securities underwriting chiefly involves new loans expressly written for securitization. And it is here where banks are making an impact.

Starting in 1994, many big banks began originating fixed-rate, long-term nonrecourse commercial loans through mortgage conduit programs, with the intent of amassing them for securitization. New loans are warehoused until they reach a critical mass (about $500 million today), then securitized.

These mortgage conduits have largely taken the place of the S&Ls, the primary permanent lenders in the 1980s on smaller commercial real estate.

Overall, conduits accounted for roughly one third, or $10.2 billion, of commercial-mortgage-backed issuance last year, up an eye-popping 127% from 1995, according to Commercial Mortgage Alert.

Of the top 10 conduit programs, five were sponsored by commercial banks: First Union ($878 million), NationsBank ($787 million), J.P. Morgan ($722 million), Citicorp ($495 million), and Wells Fargo ($446 million). Big competitors include investment banks and large real estate financial services firms. Why the interest by such name banks?

Primarily, securitization allows lenders a way to better manage their real estate portfolios. Banks can retain long-term borrower relationships by offering long-term, fixed-rate, nonrecourse product (not traditionally available from banks), while off-loading much of the real estate risk to the secondary market. Cash raised from the sale of securities is then redeployed into new loans, generating additional servicing and fee income.

The growth of commercial mortgage securitization has not gone unnoticed. Competition among lenders is fierce, with spreads and underwriting standards falling. And aggressive underwriting may create future defaults, possibly damaging credibility in the nascent market.

Banks, however, have a well-established real estate credit culture and stricter underwriting guidelines.

Already investors in securities backed by commercial mortgages are focusing less on price and more on the quality of the originator. There is also protection in pools of loans that are diverse geographically and in terms of property; the heterogeneity minimizes the impact of any one loan defaulting.

By nature, securitization imposes discipline. Because loans are increasingly destined for the secondary market, lenders can no longer be as flexible on terms and conditions. Standardized loan documentation and transaction structures are crucial to meeting rating agency and investor criteria.

Commercial mortgage securitization may never rival the single-family market in sheer size, but it can no longer be ignored. Banks, with their strong borrower relationships and national origination capabilities, should be the long-term winners. Mr. Berger is an executive vice president at Midland Loan Services, a technology-based real estate financial services company in Kansas City, Mo.

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