Commercial mortgage-backed securities special servicers turned to creative workout strategies when volume reached $81.7 billion at the end of the first quarter, according to Fitch Ratings, New York. Nearly 5,000 loans in special servicing rapidly increased workload and staff. “Special servicers are now engaging in bulk note sales, modifications into A/B notes and forbearance,” said Stephanie Petosa, managing director at Fitch. “However, the majority of the loan workouts remain within the more traditional realm of extensions, modifications and foreclosures.”
Fitch said it expects to complete annual ratings reviews on four of five most active special servicers by the end of this month, and the ratings agency plans to provide a more in-depth overview of current and emerging CMBS special servicing trends in its quarterly report later this month.
In April, CMBS delinquencies increased 89 basis points (bp) and loans 30 or more days delinquent, in foreclosure or real estate owned increased 41 bp to put the overall delinquency rate at 8.02%, according to Trepp LLC, New York.
With more than $798 billion in unpaid CMBS balances within the United States in March, nearly $49 billion of U.S. CMBS loans are either delinquent 90 days or longer, in foreclosure, or real estate-owned properties, said Realpoint LLC of Horsham, PA.
Standard & Poor’s, New York, said loan transfers to special servicers eased somewhat at the end of last year and fell 4%, while dollar volume dropped 19.5%. However, S&P also said it believes the large-balance retail loans that entered special servicing earlier in 2009 as a result of General Growth Properties’ April 2009 bankruptcy filing may have skewed the comparison.
However, Fitch said large loans drove newly defaulted loans to 487 at an $8.43-billion volume in the first quarter.
“Large loans defaults will continue to escalate, with the majority coming from recent vintage CMBS,” said Mary MacNeill, managing director at Fitch.
Upcoming maturities and other imminent or nonmonetary defaults — rather than actual missed payments — continued to account for nearly 60% of all transfer activity by loan count in the second half of 2009 to special servicing, S&P said.
Ms. MacNeill, however, said “Limited demand for office space brought on by high unemployment will lead to an uptick in defaults.”
