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CMBS Delinquencies Increasing, But Few Spell Trouble

NEW YORK, NY (March 14, 2002) -- Fitch Ratings today announced the latest numbers on delinquencies in the commercial real estate market. Although these reflect a generally increasing trend in delinquencies, over 90% of Fitch-rated commercial mortgage-backed securities have delinquencies that are less than 3%.

Of the 360 Fitch-rated CMBS deals surveilled, a significant number of deals (71.6%) have delinquencies that are less than the average delinquency of 1.25% calculated for the month of January, according to new research from Fitch Ratings. The 1.25% average is an increase from 1.11% and 1.03% in December and November 2001, respectively.

'The trend of increasing CMBS delinquencies is not surprising,' said Donna Daley Schneider, Senior Director, Fitch Ratings. 'Fitch expects it to continue as slow economic conditions continue to affect the real estate market, but Fitch Ratings does not expect delinquency rates to approach the almost 7% peak level seen in the early 1990s.' Only 9.5% of transactions have delinquencies that exceed 3%.

The Fitch Ratings delinquency calculation consists of loans 60 days or more past due, including foreclosure and real estate owned loans. When loans 30 days or more past due are included in the calculation, the delinquency rate increases to 1.56% from 1.44% and 1.40% in December and November 2001, respectively. However, Fitch believes that loans delinquent 60 days or more give the best indication of long term stress in a transaction.

Although transactions representing 28.02% have delinquencies that are greater than 1.25%, the majority of these deals have delinquencies that are only slightly greater than the average. The transaction with the highest delinquencies is Nomura Asset Securities Corp., 1994-MD1, at 46.14%. Although this percentage is staggering, it represents a small number of loans, two of the three remaining in the pool. Since this transaction has experienced significant loan payoffs, 74% since closing, the delinquent loans constitute a large percentage of the pool. Other transactions with greater than 10% delinquencies are similar to the Nomura deal, having considerable amortization and loan payoffs and a small number of loans remaining in the pool. Of the 360 Fitch-rated transactions, 18.98% are less than a year old as of Feb. 28, 2002. As one would expect, the delinquency percentage for these deals is 0.05%, much lower than the average of 1.25%. Excluding these deals, the delinquency percentage increases to 1.53%. Of all delinquent transactions, almost 30% were issued in 1998.

'That delinquency trends develop by vintage year is not surprising since 1998 was the year in which the largest amount of CMBS was issued,' according to Donna Daley Schneider.

Fitch Ratings, New York
Donna Daley Schneider

Ari Schwartzbard

Matt Burkhard (Media Relations)

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