Fitch: Rising Subordination Levels Reflect Aggressive Lending Practices in U.S. CMBS.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- The declining quality of commercial mortgage-backed securities loans over the past several months has caused credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing levels to widen, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. . The decline in structural features in CMBS CMBS See: Commercial Mortgage Backed Securities loans, coupled with aggressive underwriting practices reflect the competitive underwriting environment. Fitch has increased credit enhancement levels to reflect these risks, and if current trends continue, Fitch expects to see subordination levels continue to increase in 2005. 'Over the past year, there has been a decline in structural features such as amortization, reserves, and cash management practices, more aggressive underwriting, and a diminishing quality of borrowers with lower levels of equity in their properties,' said Dan Chambers, Managing Director, Fitch Ratings. 'For some of the deals that Fitch did not rate last year, the increased leverage and lack of structural protections have warranted higher subordination levels than were provided,' said Mary Metz, Managing Director, Fitch Ratings. Fitch will continue to closely monitor the credit characteristics of CMBS loans. 'US CMBS: Where Have All The Good Loans Gone?' is available on the Fitch Ratings web site at www.fitchratings.com. |
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