Downgrades on commercial mortgage-backed securities are expected throughout the next one to two years, according to Fitch Ratings' managing director Mary MacNeill. She said this based on the approximately 1,900 bonds, a total of $71bn, that Fitch lists with negative future outlooks. "Defaults on CMBS will continue through 2012 so further negative rating actions are likely, albeit to a lesser extent," MacNeill said. "Future downgrades will be predicated on updated valuations as many highly leveraged loans move closer toward maturity." Between January and July 2010, Fitch Ratings affirmed 2,073 tranches, of which 1,139 were downgraded and only 39 were upgraded. For CMBS bonds to maintain a triple-A or double-A rating, Fitch expects firms to pay timely interest, with no deferrals. Interest shortfalls, caused by loan modifications, appraisal reductions, special servicer fees, etc., could cause a rating to be downgraded. MacNeill said that new CMBS issuances are on the rise, however, with 10 deals completed this year, adding liquidity and new sources of refinancing for existing loans. One of those deals, was a $162m closing between Walker & Dunlop and the Department of Housing and Urban Development (HUD). It is the biggest HUD deal since 2005. Write to Christine Ricciardi.