Fitch Ratings said it will conduct a thorough review of domestic CMBS transactions issued before 2006.

The rating agency just completed a full review of CMBS deals issued between 2006 and 2008. That review resulted in the downgrade of 1,100 bond classes with a face value of $44.3 billion.

Its move to review earlier deals is prompted by expectations of continued property-markets deterioration over the coming two years.

Deals originated before 2000, as well as after the second half of 2005 and large-loan floaters "will be most susceptible to downgrades," said Mary MacNeill, managing director of Fitch. "It should be noted that the magnitude of these expected negative rating actions will not be as significant as that of recent actions already taken on later vintages."

The rating agency said that about 90 percent of the CMBS it rates carries investment-grade ratings. It added that after its review, the percentage "is likely to remain within a few percentage points" of that level. It tracks $466.5 billion of domestic CMBS.

In a report outlining its pending and just-completed reviews, the agency repeated that it expects CMBS delinquencies to hit 6 percent in the first quarter and top out at 12 percent in 2012. It said, however, that super-senior and mezzanine-level AAA bonds are likely to see their ratings affirmed "unless actual losses surpass Fitch's potential loss assumptions" of 8.7 percent on average.

The rating agency said the performance of CMBS issued before 2004 had been stable and generally benefited from loan amortization. But it said "all vintages are now susceptible to the severe economic conditions experienced over the past few years." Floating-rate loans are especially vulnerable because of the transitional nature of much of their collateral. With few lenders originating floating-rate loans that would be used to take out maturing floaters, such loans "will be more challenged."

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