Although rising new issuance and increasingly successful loan modifications are helping slow CMBS loan defaults, delinquencies likely will climb 12% this year, according to a new report from Fitch Ratings on fixed-rate conduit loans.

The rating agency expects CMBS issuance to continue to grow with leverage slowly increasing, a spokesman told this publication at a press briefing Tuesday afternoon.

At the same time, defaults in existing product are showing improvement, continuing a decelerating upward trend.

Year-to-year, CMBS defaults by loan balance rose 20% in 2010 to about $22 billion, but over the course of the year quarterly defaults declined from a high of $8.41 billion in the first quarter 2010 to $3.5 billion in the fourth quarter.

Despite the latter, somewhat promising trend, Fitch managing director Mary MacNeill, one of the report’s authors, said she thinks it’s too early to predict a decline.

According to Fitch senior director Britt Johnson, another of the report’s authors, new CMBS loan defaults are likely to come from loans beginning to amortize and from properties in struggling or slow markets that are unlikely to keep tenants at current rental rates.

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