DBRS Publishes Methodology for CMBS Surveillance

DBRS has today published a methodology for its surveillance of commercial mortgage-backed securities (CMBS). This methodology details DBRS’s surveillance procedures as they relate to all CMBS rated by DBRS (inclusive of public ratings, private ratings and CMBS collateral contributed to asset-backed commercial paper and collateralized debt obligations) and describes the analysis taken to arrive at any rating actions arising from the surveillance.

“A variety of events can affect the collateral of a CMBS pool and the cash flow necessary to ensure timely and ultimate payment of CMBS bonds,” says Erin Stafford, Senior Vice President of CMBS Surveillance. “During the life of a transaction, loans go delinquent, take losses, defease or prepay; tenants vacate; markets improve or soften; property values increase or decrease, to name only a few things that can change.”

When initially establishing a rating, DBRS assumes that changes in the performance of the underlying loans can and do occur; therefore, it assigns ratings designed to withstand a certain level of volatility within the underlying commercial mortgage loans. Surveillance is critical to measuring and communicating to the investment community whether or not a change has the potential of affecting the ratings assigned to the bonds.

This methodology will give the reader greater transparency into the DBRS CMBS rating philosophy. DBRS expects its ratings to hold throughout a cycle; however, DBRS is committed to performing surveillance and releasing performance update reports at a level that increases the transparency of its ratings.

The methodology providing DBRS's processes and criteria is available by contacting us at info@dbrs.com.