Lenders or debt-holders, such as banks, sometimes accumulate a considerable amount of real estate specific debt. When the cumulative debt bears too much risk the lender will look to pool and sell some of its mortgages to, or for the right to collect principal and mortgage payments from, other banks or investors. These mortgage-backed securities (MBS) are held by different types of real estate such as residential or commercial properties. Note that the terms of the mortgages do not change so the property owner of record continues paying the same principal and interest.

The originators of MBS are generally the larger banks such as Morgan Stanley Dean Witter, Lehman Brothers and JP Morgan Chase. Before they pool their mortgages and issue the MBS, the originators have to rate the debt -- much like is done in the bond market. The rating gives the potential buyer an idea of the risk associated with debt and ultimately impacts the cost of MBS.

^ Let's focus on the commercial mortgage backed securities (CMBS) market and the third party agencies that are hired to rate the debt. CMBS are secured by loans with commercial properties. Investors that buy CMBS purchase an undivided interest in a group of commercial mortgages. The agencies are hired by the issuer to provide an objective rating of the debt for a fee. The rating is based on a report that is part financial analysis and part market analysis. Typically, the CMBS issuer hires more than one rating agency and the buyer can evaluate multiple ratings. Over the past ten years, the CMBS market has grown from $10 billion to $400 billion.

The work atmosphere at a rating agency is team oriented and focuses on delivering an impartial analysis of the CMBS offering. Essentially the agency does what the CMBS issuer originally did. It looks at the creditworthiness of the properties and debtors behind the mortgages. The team works on deals together from start to finish.

Newcomers enter the field as analysts. Their responsibilities include data entry and financial modeling. Supervising the analyst is the director whose main role is to collect and streamline all documents. The director is also a fact checker, often writes the final rating report and oversees the underwriting by the analyst. At this level the client interaction begins. Next in the hierarchy is the senior director who supervises all the work being done by the director and executes any requests from the client. Right above the senior director is the managing director who usually has the banking relationships. This person's principal role is to get business and smooth out any problems. The group managing director is at the top of the heap in the office. He's responsible for the business.

Although some rating agencies are international, the workload is often based on geography. Therefore, if you're on the east coast the deals that you will work on will most likely involve east coast properties. Likewise the international deals are done by foreign offices.