Fitch Sees Rising CMBS Late Pays

Delinquencies in commercial mortgage-backed securities will rise in the next 12 months, but more as a result of declining real estate fundamentals than the war with Iraq, according to Fitch Ratings.However, "given the sound structural projections in CMBS transactions, investment-grade bonds can weather the current economic instability," said Susan Merrick, a managing director at Fitch. The rating agency expects the war to bring a decline in travel that will affect the hotel industry, causing a rise in hotel-backed CMBS delinquencies, especially if the war is long and the threat of terrorism continues. (Fitch said hotel delinquencies have already spiked in the first two months of the year.) The rating agency said it does not expect much increase in retail-backed mortgage loan delinquencies, despite predictions of lower sales, unless there are additional bankruptcies among major retailers. Another threat to the CMBS market is the possibility of terrorist attacks. "Another terrorist attack in the United States could rekindle the event risk which widened spreads on single-asset CMBS deals post Sept. 11," Fitch said. "With the increase in the number of fusion transactions, a larger portion of the CMBS market could be affected." Fitch can be found online at http://www.fitchratings.com.