NEW YORK CITY-After Fitch Ratings predicted that CMBS fundamentals are slowly stabilizing this year, the latest index results from the global ratings agency shows that delinquencies for US commercial real estate loan collateralized debt obligations (CDOs) saw their largest decline in almost four years. The new report notes that late-pays declined to 12.6% in June from 14.1% in May, making it the most significant drop since October 2007.

One of the reasons for the delinquency decline is related to the disposal of 25 troubled assets from the index this month. The removed assets included: four matured balloons, which were recently extended; two term defaults brought current; two loans that were repurchased in the prior month; three defaulted B-notes; six impaired CMBS with prior interest shortfalls; four mezzanine interested foreclosed out; four assets sold at discounts from 21% to 54%.

Fitch notes that many of these resolutions resulted in better than expected recoveries; over half were resolved without losses to the CDOs themselves. These variations are common, explains Stacey McGovern, director at Fitch Ratings, who says in a statement: "Like CMBS, CREL CDOs are likely to remain somewhat volatile with significant month to month fluctuations as new loans become delinquent and delinquent loans become resolved."