Valentine’s Day brought more evidence that illiquidity in the CMBS market has little to do with current loan performance: A report from Fitch Ratings revealed that U.S. CMBS delinquencies fell by one basis point to a historical low of 0.27% in January.

“Out of the over 40,000 loans in the Fitch-rated universe, only 293 are delinquent,” says Susan Merrick, managing director at Fitch.

Measures of whether CMBS delinquencies are decreasing or increasing are partially a matter of perspective, however. That explains why rating agency Standard & Poor’s has been warning of increasing delinquencies for a year.

Unlike Fitch, which defines a loan as delinquent when it is at least 60 days overdue, Standard & Poor’s counts loans delinquent after only 30 days. By Standard & Poor’s calculations, CMBS delinquencies have been on the rise since hitting a low of 0.27% in the first quarter of 2007. Delinquencies reached 0.34% in the fourth quarter, up 5 basis points from 0.29% in the third quarter, according to a Standard & Poor’s report published Feb. 8.

What the agencies do agree upon is that the dollar amount of delinquent loans is increasing, and recent years of excess are contributing a growing portion to the delinquent pie. Total delinquent CMBS increased 19% to $2.279 billion in the fourth quarter from $1.915 billion in the third quarter, Standard & Poor’s found. Of that year-end amount, nearly half came from loans originated in the past three years.

“2005, 2006, 2007 vintage years now comprise 45% of all delinquencies,” says Larry Kay, director of structured finance ratings at Standard & Poor’s. “These years were characterized by relaxed underwriting, high leverage and little loan amortization.”

Does that suggest a pending crisis? Again, it depends on who you ask. The 2005-2007 vintages each had more than $300 million in delinquencies by Standard & Poor’s reckoning, and it’s still early in the life cycle of those loans. Delinquencies in any vintage tend to peak in the third to fifth year, which suggests delinquencies will swell for those vintages through about 2012. “With little margin for error, we expect the 2005-2007 vintage years to experience above-average delinquency levels that will plague CMBS performance for some time,” analyst state in the Feb. 8 report.

Fitch analysts emphasize the rate of delinquency rather than dollar volume. From that view, delinquent loans from recent vintages aren’t alarming because they represent a fraction of the tremendous loan volume generated from 2005 through 2007. Loans 60 days or more delinquent amounted to 0.25% of 2005 volume, 0.12% in the 2006 vintage and 0.05% for 2007, according to Fitch.

“Issuance volume is a very important factor when determining which vintages may have credit issues,” says Merrick. “Certain recent vintages may have delinquent loans, but when compared to the large volume of issuance in these years, the proportion is very small.”

Where does Fitch see the most delinquencies? Loans originated in 1998 had the largest amount of delinquencies at $257.6 million, or 16.7% of all delinquent CMBS loans. That equates to a 1.43% delinquency rate for the 1998 vintage, the most of any year. The next highest delinquency rates compared with the outstanding balances in each vintage year were 2001 at 0.81%, 1997 at 0.74%, 2000 at 0.56%, and 2004, 0.49%.

By property type, Fitch identifies multifamily as experiencing its sixth consecutive monthly increase in delinquent loans, with $23 million additional loans classified as delinquent in January. The sector accounts for 58.1% of all delinquent loans rated by Fitch. Retail made up 15.9% of delinquencies; office, 12.3%; and hotel, 5%.

Despite today’s low delinquency rates, analysts warn that CMBS performance could stumble in the coming months as borrowers come under greater challenges to maintain rent and occupancy levels in a slowing economy that may slide into recession. Standard & Poor’s predicts delinquencies will continue to increase and could surpass the peak of $3.96 billionthe agency recorded in December 2003. If that occurs, some time in 2008 or 2009, the delinquency rate would be double its current level.

Fitch analysts agree that delinquencies will likely double this year and could even triple. “But even with a triple [increase], they’re still much lower than they were a few years ago,” says Mary MacNeill, managing director at Fitch. “They would still be in line with the historical average, which is 0.78% to 0.79%.”