US CMBS Loan Defaults to Exceed 5% by Year-end: Fitch
Following a substantial jump in first-quarter-2009 (1Q’09), loan defaults for U.S. CMBS are expected to exceed 5% by the end of this year, according to Fitch Ratings.
In its latest annual default study of commercial mortgages underlying its rated CMBS transactions, Fitch says 1Q’09 defaults reached $2.6 billion, compared to $3.2 billion for all of 200 As of year-end 2008, the cumulative default rate increased to 3.29% from 2.71% in 2007. Fitch expects the rate of defaults to increase consistent with the levels of defaults in the last six months. Larger loans in the 2006 and 2007 vintages have begun to default, and Fitch expects this trend to continue in 2009 as the slow economy and lack of financing contribute to cause stress in commercial loan performance.
Multifamily properties represented the highest of all property defaults in 2008 with $1.06 billion in new defaults and a default rate of 5.21%. Retail defaults increased significantly to $1.03 billion with a default rate of 2.52%.
Fitch expects both multifamily and retail to lead defaults by the end of 2009.
The 2006 vintage had the highest dollar balance and number of defaults in 2008 with $742.9 million and 78 loans. Loan defaults among 2007 CMBS transactions will lead all other vintages by year end as larger loans within these deals have begun to default in late 2008 and early 2009. For details see U.S. CMBS Loan Default Study: 1993-2008.
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