Fitch: U.S. CMBS Servicers Holding REO Inventories Longer

NEW YORK--(BUSINESS WIRE)-- While losses on real estate-owned (REO) liquidations have been declining in recent months, that trend may reverse later in 2015 as U.S. CMBS servicers hold on to these specially serviced assets for longer periods of time, according to Fitch Ratings in its latest weekly newsletter.

Fitch notes that declines in REO portfolios have leveled off of late compared to a more rapid increase in the number of CMBS loan resolutions in the past 12 months. The number of CMBS loans in special servicing has decreased by 21% in the past 12 months. As of Dec. 31, 2014, there were 2,264 CMBS loans totaling $38.5 billion in special servicing, compared to 2,879 CMBS loans totaling $49.5 billion as of Dec. 31, 2013.

REO assets are still concentrated among the highest rated CMBS servicers and account for approximately 90% of the REO assets in Fitch's study. The remaining REO assets face market location and asset quality challenges which contribute to the noted aging of REO portfolios. The aggregate losses of REO liquidations (including sales at foreclosure) declined to 49% during 2014 compared to 54% in 2013. However, Fitch believes the aggregate losses will rise given the increased aging of remaining REO assets in special servicing.

The increase in aging of REO inventories stands out against the pace of loan resolutions that belie the broader market recovery for commercial real estate. The completion of judicial foreclosures that began two to three years earlier and adverse selection of remaining REO properties are still major factors contributing to the increased hold times of current REO inventories and future losses.

Additional information is available in Fitch's weekly e-newsletter, 'U.S. CMBS Market Trends', which also contains recent rating actions and an overview of newly released CMBS research, including Fitch presales and Focus reports. The link below enables market participants to sign up to receive future issues of the E-newsletter:

'http://pages.fitchemail.fitchratings.com/CMBSMktOptin/'

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

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Fitch Ratings
James Bauer
Director
+1-212-908-0343
Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004
or
Adam Fox
Senior Director
+1-212-908-0869
or
Media Relations:
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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