NEW YORK— According to the latest commercial mortgage-backed securities (CMBS) conduit loan study published today by Fitch Ratings, the annual default rate of conduit loans in Fitch-rated U.S. CMBS transactions was 0.72% in 2002 and, even with current stressed market conditions, is expected to rise to only 0.9% by year-end 2003. Despite our expectations of rising defaults in 2003, CMBS investors should keep in mind that in Fitch-rated transactions, fewer than 3% of the almost 30,000 loans in the CMBS transactions reviewed in this study have ever experienced a monetary default said Mary MacNeill, Senior Director, Fitch Ratings. A total of 311 new loans experienced defaults in 2002, bringing the total number of defaults since 1993 to 807. Fitch estimates that the cumulative default rate, currently at 2.66%, will rise to 3.75% in 2003, with the total dollar balance of defaults increasing from the current $4.7 billion to $7.6 billion. Fitch does not anticipate loan defaults to stabilize until an economic recovery gains momentum, which could be more than a year away, said MacNeill. The new study, which analyzed 200 Fitch-rated transactions with an aggregate principal balance of roughly $177 billion, found that 74% of the 2002 default balance was attributed to the hotel, retail and multifamily sectors.
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