Fitch: U.S. CMBS Appraisal Reductions under Scrutiny.

NEW YORK -- Declining commercial real estate values, along with higher loan default rates and delinquencies are placing more focus on servicer advancing and appraisal reductions in the U.S. CMBS sector, according to Fitch Ratings in a new report.

'Servicer advances ensure that bondholders receive timely interest payments, so when servicer advances are non-recoverable or if a loan experiences an appraisal reduction, interest shortfalls have the potential to adversely affect CMBS bond ratings,' said Managing Director Stephanie Petosa.

Master servicers will need to monitor their advances diligently to avoid advancing beyond the value of the underlying collateral. 'Highly rated CMBS servicers use their experience to read and apply information gathered from appraisals and employ various tools to determine market value accurately,' said Senior Director Richard Carlson.

To stress the importance of servicer advances, Fitch will place any investment grade CMBS classes with interest shortfalls on Rating Watch Negative until the shortfall is cured. If the shortfall does not meet a resolution, Fitch will downgrade the tranches in question.

'US CMBS Advancing and ASERs - A Primer' is available at www.fitchratings.com under the following headers:

Structured Finance >> Operational Risk Group >> Special Reports

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.