A rising number of secondary assets are achieving lower loss severities upon dispositions of troubled loans, which could lead to a decline in overall REO loss severity by the end of 2011, a Barclays Capital report said.

The Barclays report cited the recent Fair Lakes Promenade shopping center, securitized in BACM 2006-3 (top 15 loan), sale for $39.5 million to LaSalle Investment Management. This an example of where the sale could end up as a zero loss severity liquidation in the February remittance report. Typical loss severity for REO liquidations is around 60%, according to Barclays analysts.

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