Fitch: Limit CMBS Servicer Advances

Limiting advances of principal and interest to 12 months for delinquent loans should remedy the growing problem of interest shortfalls in investment-grade commercial mortgage-backed securities, according to Fitch Ratings.Such interest shortfalls often result in downgrades to CMBS certificates or their placement on Rating Watch Negative, the rating agency said. Fitch advised that advancing be made contingent on recoverability and said a 12-month time limit "would not preclude servicers from making property protection advances" and funding necessary, limited expenses. The rating agency explained that when a servicer determines an advance to be nonrecoverable based on inadequate property value, the servicer is entitled to reimbursement. "A time limit on servicer advances would reduce the likelihood that recovery of servicer advances results in interest shortfalls up to investment-grade," Fitch said. The rating agency can be found online at http://www.fitchratings.com.