The second quarter of 2004 recorded the second-highest CMBS upgrades ever in a three-month period, according to Standard & Poor's. In addition, the period recorded the lowest number of downgrades since 3Q01. Overall, S&P said there were 155 North American CMBS ratings actions during the second quarter, with 119 upgrades and 34 downgrades. Year-to-date, there has been 173 upgrades and 95 downgrades in 268 ratings actions.
S&P said that factors driving the positive performance included low loan default levels, strong demand for loan originations and low interest rates. Still, there are some areas of concern, said S&P. For example, analysts noted that a majority of the negative ratings actions have occurred in floating-rate transactions due to adverse loan selection. In particular, 2002 vintages are showing signs of stress.