The drop over 3Q11 of commercial and multifamily loans is a credit positive for CMBS, according to Standard & Poor's in a note released this morning.

The outstanding balance of commercial and multifamily mortgages dipped $22 billion to $3.09 trillion in the third quarter, S&P said, citing the Federal Reserve flow-of-funds data.

This, analysts said, is "a positive for the credit of currently originated loans in CMBS in our view."

Historically, they stated, there is a strong and positive correlation between loan losses and the CRE debt to GDP ratio, which is a variable in S&P's CMBS Leading Indicators (CLI) Index.

The ratio between CRE debt/GDP dipped 0.4% to 20.3% over the quarter. It has also decreased from the peak of almost 25% in 2008.

The rating agency said that since year-end 2010, life insurance firms have added slightly to exposure. Meanwhile, banks and CMBS have declined.

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