Defeasance of commercial mortgage-backed securities loans in the United States rose 25% in 2007, as 3,000 loans with an outstanding balance of $32.4 billion were defeased, according to Moody's Investors Service. The record was mostly due to a surge in the first half of the year, which was followed by a "significant drop-off" in defeasance activity in the second half, Moody's said. Defeasance in the fourth quarter was approximately 53% lower than in the same period of 2006. "The tremendous growth of defeasance that CMBS has experienced since 2004 continued into 2007," said Sandra Ruffin, a Moody's senior credit officer. "Strong property appreciation and a robust lending environment during the first half of the year made it attractive for even relatively recently securitized loans to defease." Moody's said it expects reduced liquidity and less scope for real estate appreciation to limit defeasance volumes in the near future. The rating agency can be found online at http://www.moodys.com.
