Fitch Commercial RE Delinquency Index Rises

The Fitch Commercial Real Estate CDO Delinquency Index increased by 111 basis points in January as 20 newly delinquent loans pushed the index to 3.83% for January 2009, compared to 2.72% in December 2008. "The inherently transitional nature of CREL CDO collateral has resulted in an increasing number of these assets becoming delinquent or failing to meet expectations in this stressed economic environment," said Fitch senior director Karen Trebach. Fitch said it anticipates that delinquencies on loans backed by land for development, turnaround projects and construction properties will continue to increase as interest reserves burn off and sponsors become unable or unwilling to come out of pocket to cover debt service payments. Meanwhile, defaults on three 2007 vintage loans ranging in size from $130 million to $225 million led to a 27 basis point increase for January U.S. commercial mortgage-backed securities loan delinquencies to 1.15%, according to Fitch. "High-profile loans secured by larger properties, which were often not stabilized at transaction issuance, have begun to default," said Susan Merrick, managing director and head of the U.S. CMBS group. Fitch said it expects that performance defaults on larger loans will push up the loan delinquency index in coming months, to approximately 3% by year-end 2009. With pools consisting of many larger assets, the 2006 and 2007 vintages are likely to be the largest contributors to delinquencies.