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August 2009
Page 1 of 15
Table 1 - Trailing Three Months DelinquencyJul-09Jun-09May-09CategoryUPB ($BB)UPB ($BB)UPB ($BB)30-Day
5.23$ 11.24$ 4.42$
60-Day
3.97$ 3.07$ 3.50$
90+-Day
11.23$ 9.57$ 6.94$
Foreclosure
3.05$ 2.67$ 2.24$
REO
2.21$ 2.10$ 1.67$
Current
793.49$ 788.76$ 806.58$
Total CMBS819.17$ 817.41$ 825.36$ Total CMBS Del.25.68$ 28.65$ 18.78$ Delinq. %
3.135%3.505%2.275%
Monthly Delinquency Report - Commentary 
In July 2009, the delinquent unpaid balance for CMBS decreased for the first time since August 2008after 10 straight monthly increases, down to only $25.68 billion from $28.65 billion a month prior.Delinquency in June 2009 had increased by a substantial $9.87 billion from May, up to a trailing 12-monthhigh of $28.65 billion. The decline through July, however, came after nearly $4.8 billion of GGP-sponsored loans were returned to current payment status following a 30-day delinquent status in June.While the ultimate resolution of these GGP-sponsored specially-serviced loans has yet to be determined,many were reported as current in July 2009 after multiple master servicers made modifications to theirsystems to account for the non-default rate interest-only payments being made on previously amortizing(principal and interest required) loans. On the other hand, not all master servicers are accounting for theGGP payments and cash-collateral order in the same fashion, and these loans remain on our RealpointWatchlists for potential future delinquency and / or workout via liquidation.Despite the decline, the delinquent unpaid balance throughJuly 2009 remains up an astounding 511% from one-yearago (when only $4.2 billion of delinquent balance wasreported for July 2008), and is now almost 12 times the lowpoint of $2.21 billion in March 2007. Outside of the 30-daydelinquency decline, an increase in the remaining fourdelinquent loan categories was noted in July. More notably,the distressed 90+-day, Foreclosure and REO categoriesgrew in aggregate for the 20
th
straight month – up by $2.15billion (15%) from the previous month and over $13.63billion (377%) in the past year.The total unpaid balance for all CMBS pools under review by Realpoint was $819.2 billion in July 2009.Both the delinquent unpaid balance and delinquency percentage over the trailing twelve months areshown in Charts 1 and 2 below, clearly trending upward.
Charts 1 and 2 – Monthly CMBS Delinquency: Balance vs. Percentage
(
source: Realpoint) 
 
$4.07$4.64$5.39$7.03$8.68$10.79$11.99$13.89$17.15$18.78$28.65$25.68
$0.00$5.00$10.00$15.00$20.00$25.00$30.00
   $   (   i  n   b   i   l   l   i  o  n  s   )
Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09
Month
 
 
August 2009
 
Page 2 of 15
0.472%0.543%0.631%0.828%1.025%1.281%1.431%1.664%2.066%2.275%3.505%3.135%
0.000%0.500%1.000%1.500%2.000%2.500%3.000%3.500%4.000%
   P  e  r  c  e  n   t  a  g  e
Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09
Month
 
Note: 
Even if the $4.8 billion of GGP-sponsored loans that returned to current payment status in July were omitted from the reported delinquency stats in June (effectively ignored for delinquency reporting purposes), the monthly trend of growth for CMBS delinquency would have continued. Specifically, after removing these loans,
CMBS delinquency still increased from $18.78 billion in May 2009 (2.275%) up to a hypothetical $23.85 billion in June 2009 (2.92%), and then to 25.68 billion in July (3.135%).
 
The resultant delinquency ratio for July 2009 of 3.14% (down slightly from the 3.5% reported one monthprior) is now over six times the 0.49% reported one-year prior in July 2008 and over 11 times theRealpoint recorded low point of 0.283% from June 2007. The increase in both delinquent unpaid balanceand delinquency ratio over this time horizon reflects a steady increase from historic lows in mid-2007.An additional $152.4 million in loan workouts and liquidations were reported for July 2009 across 34 loansat an average loss severity of 31.3%. Fifteen of these loans, however, at $87.62 million experienced aloss severity near or below 1%, most likely related to workout fees, while the other 19 loans at $64.8million experienced an average loss severity near 55%. As additional pressures are placed on specialservicers to maximize returns in today’s credit market, true loss severities are expected to be high whileliquidation activity is expected to slow as fewer transactions occur. This would be the result of reduced ordistressed asset pricing, lower availability of take-out financing, and increased extensions of balloondefaults through 2009 and 2010.
Forecasted Delinquency by Balance and Percentage – Scenario Analysis
Overall, following the correction of the GGP-sponsored loans in July, we now expect the delinquentunpaid CMBS balance to continue along its current trend and grow towards $50 billion before the end of2009.
Based upon an updated trend analysis, we project the delinquency percentage to grow in excess of 6% before year-end 2009 (potentially approaching and surpassing 8% under more heavily stressed scenarios).
This outlook is mostly due to the reporting of several large loans fromrecent vintage transactions that continue to show signs of stress and default, along with continued balloonmaturity defaults from more seasoned vintage transactions. In addition, while we maintain our negativeoutlook for both the retail and hotel sectors for 2009, we are closely monitoring the negative trendssurrounding several large struggling multifamily loans in the New York MSA that have near-term defaultrisk, and the lack of new issuance to offset the continued increases in delinquent unpaid balance.
 
August 2009
 
Page 3 of 15
Year Issued# of LoansCurrent Balance
2007664,627,226,962.92$200650943,418,490.99$200543825,828,288.59$200434685,220,196.41$20031059,890,210.70$2002320,354,138.41$20019123,212,550.35$20001267,351,065.05$199960255,918,408.60$1998535,478,842.64$199733,407,319.37$
Totals2957,647,306,474.03$Table 2: Monthly Special Servicing TransfersJuly 2009
 Our historical scenario and trend analysis regarding recent default activity and the potential for futuredelinquency growth (
affected somewhat by the delinquency fluctuation of the previously mentioned GGP- sponsored specially-serviced loans)
presents the following:
Scenario 1 (Six-Month Historical Assumptions):
•
Over the past six months, delinquency growth by unpaid balance has averaged roughly $2.5billion per month, while the outstanding universe of CMBS under review has decreased onaverage by $3.94 billion per month from pay-down and liquidation activity.
•
If such delinquency average were increased by an additional 25% growth rate, and then carriedthrough the end of 2009,
the delinquent unpaid balance would reach $41 billion and reflect adelinquency percentage near 5.05% by December 2009.
 
•
In addition to this growth scenario, if we add-in the potential default of two very large high riskCMBS loans under review by Realpoint (namely the $3 billion Peter Cooper Village / StuyvesantTown loan spread through multiple CMBS deals via a pari passu structure, and the $4.1 billionExtended Stay Hotel loan in the WBC07ESH pool – 
which was recently transferred to the special servicer in July following the Chapter 11 bankruptcy protection filing of Extended Stay and the potential for CMBS debt restructuring 
),
the delinquent unpaid balance would top $48 billionand reflect a delinquency percentage over 6% by December 2009.
 
Scenario 2 (Three-Month Historical Assumptions):
•
Over the past three months, delinquency growth by unpaid balance has averaged roughly $2.85billion per month, while the outstanding universe of CMBS under review has decreased onaverage by $3.7 billion per month from pay-down and liquidation activity.
•
If such delinquency average were again increased by an additional 25% growth rate, and thencarried through the end of 2009,
the delinquent unpaid balance would reach $44 billion andreflect a delinquency percentage slightly above 5.3% by December 2009.
 
•
In addition to this growth scenario, if we again add-in the potential default of the $3 billion PeterCooper Village / Stuyvesant Town loan and the $4.1 billion Extended Stay Hotel loan,
thedelinquent unpaid balance would reach $51 billion and reflect a delinquency percentageabove 6.3% by December 2009.
 
Special Servicing Exposure and Other Trends
Special servicing exposure continues to rise dramatically on a monthly basis, having increased for the15
th
straight month through July 2009. The unpaid balance for specially serviced CMBS increased on anet basis by $7.34 billion in July 2009, up to a trailing 12-month high of $47.87 billion from $40.53 billion in June andonly $37.05 billion in May. In addition, newly transferredspecially-serviced loans totaled 295 at $7.65 billion in July2009, as shown in Table 2. Worth noting is that anadditional 159 loans at $6.396 billion of such balance (84%of newly transferred balance) were issued from 2005through 2007. Our default risk concerns for the 2005 to2007 vintage transactions relative to underlying collateralperformance and payment ability are more evident on amonthly basis. Both the volume and unpaid balance ofCMBS loans transferred to special servicing on a monthlybasis continues to raise questions about underlying creditstability in today’s market climate for these more recentvintage CMBS deals.
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