Fitch Loans of Concern Expected To Rise

e recent growth in reported net operating income (NOI), Fitch Loans of Concern are expected to continue their climb, according to the latest U.S. commercial mortgage-backed securities (CMBS) VintageView results. NOI has increasedby an average of 4% year over year, with nearly half of the loans in the Fitch-rated universe reporting year-end 2008 operating performance. "As additional loans report year-end financials, Fitch expects NOI growth to slow as better-performing loans generally report performance earlier than poorer-performing loans, leading to the current year-on-year NOI increase," says Managing Director Mary MacNeill. "Fitch Loans of Concern are expected to rise, especially in earlier vintages with adverse selection and later vintages with aggressive underwriting." Fitch Loans of Concern are up 53 basis points (bps) in fixed-rate multi-borrower transactions due to deteriorating performance. Transactions that were originated in 1999 and prior, as well as 2007 and 2008, contain above the average of 14.17% Loans of Concern. Transactions from 1999 and prior vintages exhibit adverse selection. Loans in 2007 and 2008 transactions were originated at peak market conditions and have shown signs of weakening performance. Loans of concern in floating-rate transactions are down 12 bps from the prior month, but remain high at 25.01%. This is due to the non-stabilized nature of the loans. Also, there is near-term refinance risk due to the shorter loan terms and the lack of liquidity in the current market, Fitch says. SOURCE: Fitch


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