Fitch: Streak of Falling U.S. CMBS Loan Defaults Set to End

CHICAGO--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: U.S. CMBS 2015 Loan Default Study (Likely Low Point for Defaults)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879387

New U.S. CMBS loan defaults fell for a fifth straight year in 2015, though the streak appears set to come to a close according to Fitch Ratings in its latest loan default study.

Fitch expects term defaults to tick up slightly this year as the current credit cycle matures. This comes after annual defaults declined for the fifth consecutive year. After peaking at 4.1% in 2010, the annual default rate now sits at 0.4%. 'Commercial real estate markets had another good year in 2015 as the economy continued to grow, healthy new issuance volume provided ample liquidity and new construction remained generally muted,' said Senior Director Brook Sutherland.

Many problem loans originated during the previous peak have already defaulted. That said, 'maturity defaults also stand to increase in the next few years as peak vintage loans, many of which are over levered, mature,' said Sutherland. In total, 181 loans defaulted with a balance of $2.7 billion in 2015. This compares to 294 loans totaling $3.9 billion in 2014 and 353 loans totaling $5.4 billion in 2013. Peak vintages once again drove defaults, with 2005-2007 loans accounting for nearly 88% of the total.

The cumulative default rate in 2015 fell to 13% from 13.3% in 2014. Fitch expects the cumulative default rate to increase slightly in 2016 as CMBS 2.0 loans begin to default at a higher rate and new issuance volume declines. Office reclaimed the throne as the default leader in 2015 after ceding it to retail in 2014. Office defaults handily outpaced all other property types with 64 loans defaulting totaling $1.4 billion (53%) in defaults. This compares to 86 office defaults totaling $1.2 billion in 2014 and 141 office loans totaling $2.6 billion in 2013.

Fitch's 'U.S. CMBS 2015 Loan Default Study' is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at 'www.fitchratings.com'.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160404005885/en/

Fitch Ratings
R. Brook Sutherland
Senior Director
+1-312-606-2346
Fitch Ratings, Inc., 70 West Madison Street, Chicago, IL
or
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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