Fitch: Challenges Ahead for CMBS Servicers

Saying that it expected CRE delinquencies to double in 2008, Fitch Ratings today said it would put CMBS servicers under “rigorous testing” to ensure servicer stability. While the agency has repeatedly said that worries about the CMBS market are overstated, it’s clear the agency sees current credit market upheaval as the first real stress test any CMBS servicer has faced.

Fitch noted that many CMBS servicers have yet to prove an ability to withstand “material adversity.” Special servicers, in particular, appear to be an area of concern; special servicing refers to a niche specializing in non-performing assets.

“Due to the current liquidity environment, it will no longer be as easy to dispose of real estate owned assets,” said managing director Stephanie Petosa.

“Although there is still capital in the real estate market, the profile of the buyers has changed and individual real estate investors are less likely to be able to purchase property because their financing options are limited.”

Fitch said it expects to see CRE delinquencies double during 2008 from their current level of 31 basis points. To read the full report click here (registration req’d).

For more information, visit http://www.fitchratings.com.