Fitch Ratings on Monday said it expects to keep its top rating on the most senior commercial mortgage-backed securities for the foreseeable future, setting it up for a potential ratings showdown with rival Standard & Poor's.


Fitch's expectations come four days after S&P rattled the $700 billion commercial bond market by projecting 95 percent of bonds issued during the peak year of 2007 may be cut from AAA, based on a plan that would make its rating methods more conservative.


Investors have speculated that a thicker cushion for loss on the most senior CMBS -- versus securities backed by residential mortgages -- would buoy the bonds' values even as the U.S. recession slams commercial property. The move by S&P has thus opened a divide between investors who see it as appropriate, and those that say the move is draconian and will reduce market values with an unnecessary wave of selling.


Fitch said it is basing its expectations on assumptions of total commercial property value declines of 35 percent and immediate income drops of 15 percent. Loans made in 2007 may see losses of 13.5 percent or more, but half of that will not be seen until maturity, seven to nine years away.


With seven to nine years of remaining term, there is significant uncertainty regarding the timing and magnitude of ultimate maturity losses, Susan Merrick, head of Fitch's CMBS group, said in a statement.


Many commercial mortgage bonds default because of a lack of credit, which hinders the ability of borrowers to refinance maturing loans.


Fitch said it expects to downgrade 75 percent to 85 percent of junior AAA CMBS, as a result of revised loss forecasts.