Fitch Calls for Enhanced CRE CDO Reporting

Unrated commercial real estate loans represent a growing proportion of U.S. CRE collateralized debt obligations, and the key to promoting transparency in such transactions is "consistent, enhanced, ongoing loan-level reporting," Derivative Fitch says in a new report."By providing more standardized information, asset managers can increase the transparency and, consequently, the liquidity of their transactions," said Fitch senior director Karen Trebach. In the report, Fitch describes the information it requests from asset managers and explains the value of each report. Enhanced reporting provides early warning signals to alert asset managers when to step in to modify a loan or pursue other remedies, the rating agency said. One advantage of a CRE CDO structure over commercial mortgage-backed securities REMIC structures is that the CDO "allows asset managers more flexibility to modify loan terms even prior to an actual default," Fitch said. The rating agency can be found online at http://www.derivativefitch.com.