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Recoveries up for liquidated CMBS loans.

The commercial mortgage-backed securities (CMBS) special servicing universe shrank--and recovery rates on liquidated loans rose sharply--during the first half of 2014, reported Fitch Ratings, New York.

"Recovery rates on liquidated CMBS loans rose substantially during the second quarter after reaching historic lows the two previous quarters," said Fitch Managing Director Stephanie Petosa.

She said actual recovery rates improved to 69.5 percent for the second quarter compared with an average of 57.7 percent for the two previous quarters.

"Additionally, a sizable portion of CMBS loans were liquidated with less than a 5 percent loss during the first half of this year," Petosa said.

Recovery rates increased as the size of the CMBS special servicing universe continues to contract. CMBS loans in special servicing topped $43.7 billion at the end of June--less than half of the $91.7 billion high-water mark in 2010. "The rate of CMBS loans transferring out of special servicing more than doubled those loans coming in during the first six months of the year," Petosa said.

But for the first time in more than two years, Morningstar Credit Ratings, Chicago, observed an increase in CMBS delinquent unpaid balance for two consecutive months in August. This followed delinquency declines for 13 straight months and for 25 of the past 32 remittance cycles.

Morningstar reported that the delinquent balance increased to $33.1 billion in August, up from $32.64 billion in July and $32.48 billion in June. But as new issuance outpaced loan portfolio runoff and paydown, the actual delinquency percentage remained flat at 4.34 percent in August, the ratings firm said.

"Morningstar does not expect this growth to be the norm going forward as liquidations continue to be high on a monthly basis; however, we caution overall investor expectations regarding delinquency due to the large wave of maturing loans coming due in the next 12 to 24 months," the firm said.

Despite the delinquency-rate increase, August marked the ninth consecutive month that the overall delinquent unpaid balance remained below $40 billion, Morningstar said--a low point not seen since October 2009's $32.5 billion. "For the seventh consecutive month, the delinquency rate remained below 5 percent--a level not seen since November 2009 (at 4.71 percent)," Morningstar said.

Michael Tucker is editorial director of MBA Commercial/Multifamily NewsLink. To subscribe, visit

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Title Annotation:Commercial
Author:Tucker, Michael
Publication:Mortgage Banking
Date:Nov 1, 2014
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