The RMBS and related CDO sectors lead the pack in both realized and expected future credit losses from U.S. structured finance issuances, according to Fitch Ratings.

However, it added CMBS are expected to experience losses at a lower level than many may have anticipated.

The report noted the housing price bubble has been and will continue to be the primary driver of losses for the total structured finance universe (which includes non-real estate ABS). RMBS total losses (realized losses plus expected losses) are expected to reach 12%, while CDO losses could reach close to 43% by the time all transactions fully mature. RMBS losses represent 92% of all SF losses.

Fitch added it expects total losses to increase to $376 billion, representing 10.6% of the original balance of $3.54 trillion. So far, about $94 billion of principal has been lost since July 2007, which is when the credit crisis started. It noted 50% of all realized losses to date (by balance) are from RMBS bonds collateralized by subprime mortgages.

On the good news side, 3,453 RMBS tranches, representing 12% of the total number of tranches outstanding in 2007, have been paid in full during the past four years. Many more tranches have partly amortized, with total repayment representing 58% of the original balance.

Meanwhile, CMBS transactions have the second-lowest realized and total losses of all asset classes, representing 0.5% and 4.0% of the original balance, Fitch noted.

Few CMBS have reached their maturity dates, and most require a balloon payment. Fitch expects losses to increase materially, as loans potentially fail to repay at their maturity dates given value declines since the peak of roughly 40%.

But not only do issuers "longdate" final maturities, CMBS servicers have been extending loans that are covering debt service but perhaps not able to currently refinance, the rating agency said.

"Losses on CMBS will come in lower than many market participants may have anticipated despite a dramatic drop in property values," explained Karen Trebach, a senior director at Fitch Ratings.

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