Fitch Launches New CRE Risk Model

CreditVantage, a division of Fitch Risk, and the Boston-based Property & Portfolio Research have teamed up to launch a commercial real estate credit model.

The alliance seeks to ally PPR's commercial real estate analytics capabilities with Fitch Risk's quantitative modeling capabilities.

Real estate lenders, regulators and risk managers are increasingly looking for an empirically validated model to quantify and manage commercial mortgage risk, according to Fitch Risk, an affiliate of Fitch Ratings, the credit rating agency.

The two companies are also seeking to benefit from the need for such a model as Basel II implementation draws closer and as commercial real estate market fundamentals continue to suffer the after effects of the economic downturn.

The model, which Fitch Risk says is already used by regulators and some financial institutions, is based on a sample of defaulted and performing commercial real estate loans and measures the probability of default of a loan, portfolio or securitized pool, and the probability of loss given a default.

David Kelson, managing director, Fitch Risk, said, "This will round out our credit offerings and provide our clients with a best-of-breed solution analogous to what they currently enjoy with our products for the corporate and financial institution sectors."

And Bill Tanski, director of business development, PPR, said, "Our alliance with Fitch Risk will enhance our existing commercial real estate model and ensure its continued success."

Moody's Investors Service and Boston-based Torto Wheaton Research have recently entered into a similar alliance for quantifying the credit risk of commercial mortgages.

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