(BUSINESS WIRE) Two years of deteriorating real estate credit fundamentals and rising delinquency rates will not offset the Stable Outlook Fitch Ratings projects for the U.S. commercial mortgage-backed securities (CMBS) sector in 2004, according to Fitch's Global Structured Finance 2004 Outlook and 2003 review published today.

'Although Fitch expects increasing CMBS loan defaults in the coming year because real estate performance generally lags the overall U.S. economy in bearing the effect of a downturn, default rates will then taper off as the U.S. economy continues to stabilize,' said Mary O'Rourke, Senior Director, Fitch Ratings. Furthermore, loan losses occurring in the resolution of defaulted CMBS loans will continue to affect only a small fraction of collateral. '

While Fitch projects continued stable performance for both multiborrower and single borrower CMBS transactions, Fitch is concerned with the increasing complexity in the structure of large loans. 'Issuers are spreading risk around by securitizing portions of a single loan over several transactions in an effort to assuage investor fear of the inherent risks in large loans. This lack of uniformity will undoubtedly slow a servicer's ability to respond,' said O'Rourke.

Rising interest rates will slow the continued, yet manageable, increase in delinquencies for the multifamily sector, while Fitch projects retail CMBS loan defaults to increase. The absence of new jobs will continue to negatively affect the office and industrial sectors, which may experience a rise in defaults due to uncharacteristically high vacancy rates and falling rents in most U.S. markets. Despite gains in revenue per available room (RevPar), Fitch expects the hotel sector will continue to display its fragility as it remains subject to RevPar declines cause by unforeseen sector events.

'Despite the slightly improving but still uncertain health of the U.S. markets, global structured finance ratings demonstrated its resiliency through third-quarter 2003 with a 1.4:1 ratio of upgrades to downgrades,' said Claire Mezzanotte, Managing Director, Fitch Ratings. 'Echoing the resiliency of overall structured finance performance is that of U.S. CMBS, which has been stable throughout 2003 and looks to remain stable in the coming year.'

'Global Structured Finance: 2004 Outlook and 2003 Review' examines rating performance for 2003 and provides 2004 outlooks for structured finance markets in the U.S., Europe, Asia and Latin America, along with the global CDO markets. The report is available on the Fitch Ratings web site at 'www.fitchratings.com'.