Fitch Releases Updated Criteria for Recent-Vintage CMBS

ecent-vintage U.S. commercial mortgage-backed securities (CMBS) deals expected to substantially underperform older transactions, significant rating actions across the capital structure are likely, according to Fitch Ratings in its refined surveillance methodology for 2006-2008 vintage CMBS. Super senior AAA-rated classes are expected to keep their top-tier ratings with a stable outlook, though the rating outlook for mezzanine AAA tranches in certain deals will be negative. Fitch may downgrade these tranches over time should property market conditions continue to decline or if transactions perform substantially worse than expected, the agency says. Fitch is incorporating prospective stresses in forecasting losses, assuming 15% property income declines and 35% peak-to-trough property value declines. ‘Continued macroeconomic deterioration will result in further loan performance declines, though we will not see the full effect immediately,’ says Managing Director Mary MacNeill. Fitch placed approximately $18 billion of 2006-2008 vintage U.S. CMBS on Rating Watch Negative in April. Once the Rating Watch is resolved, many of these classes will retain a negative rating outlook due to continued performance deterioration expected for the foreseeable future. SOURCE: Fitch


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