of Concern are substantially greater in 2007 U.S. commercial mortgage-backed securities (CMBS) as compared to older vintages, according to Fitch Ratings through its new tool, VintageView. Fixed-rate deals originated in 2007 contain an average of 18% Fitch Loans of Concern. This is considerably worse than transactions originated in 2006 (averaging 8.32% Loans of Concern). Largely driving 2007 performance is the incidence of more loans with pro-forma underwriting, according to Managing Director Mary MacNeill. "Many loans in 2007 CMBS transactions may not meet their stabilization schedules anticipated at issuance with the economy in rapid decline," MacNeill says. Despite the large percentage of 2007 vintage Loans of Concern, the average [percentage of] loans currently in special servicing within the vintage is low, at 2.55 percent. However, "the number and percentage of specially serviced loans is expected to increase as many borrowers with highly leveraged loans will be unwilling to continue coming out of pocket to pay debt service," she adds. The only fixed-rate vintages with a greater number of Loans of Concern than in 2007 are those transactions originated in 1999 and prior, whose average Loans of Concern range from 18% to 29%. These transactions are generally left with loans not able to defease or refinance at their maturities or anticipated repayment dates. Fitch expects to place a number of 2007 – as well as 2006 and 2008 – vintage transactions on Rating Watch Negative in the coming days. SOURCE
