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PNC » Topics » OTTI-Commercial Mortgage-Backed Securities

This excerpt taken from the PNC 10-Q filed May 11, 2009.

OTTI—Commercial Mortgage-Backed Securities

During the first quarter of 2009, we recognized credit losses of $5 million on three commercial mortgage-backed securities. To measure credit losses we compile relevant collateral details and performance statistics on a security-by-security basis. The securities are then processed through a series of pre-established filters that include minimum thresholds for external credit ratings, that ratio of delinquencies to current credit enhancement, and market price.

 

Securities not passing all of the filters are subjected to further analysis. We conduct this analysis at the loan-level, beginning with those that are severely delinquent. The analysis includes examining historic cash flows, occupancy, rent rolls, the entire debt stack (inside and outside of the trust) and special servicer details. For non-delinquent loans, we prepare a similar analysis on the highest balance loans in each deal. For the remainder of the loans, we monitor debt service coverage ratios and loan-to-value stratifications.

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