Commercial Mortgage Backed Securities (CMBS) Defaults To Rise
S&P report warns CMBS defaults on the rise, peak default period ahead according to a report issued by Standard and Poors on August 18, 2009 –
With the effects of the recession visible across all commercial property sectors and debt financing scarce, defaults among rated North American commercial mortgage-backed securities (CMBS) increased last year.
The 529 new CMBS defaults in 2008 is more than twice the number reported in 2007–and future periods are likely to experience higher default levels as more recently issued loans enter their peak default periods.
For its 2008 default study, S&P studied the characteristics of 69,317 loans originated for securitization from 1993 through 2007 with a total original principal balance of $949.21 Billion. Loans originated between 2005 and 2007 made up 41.45% of the studied population by loan count (28,732) and 56.57% by principal balance ($537 Billion).
For its 2008 default study, S&P studied the characteristics of 69,317 loans originated for securitization from 1993 through 2007 with a total original principal balance of $949.21 Billion. Loans originated between 2005 and 2007 made up 41.45% of the studied population by loan count (28,732) and 56.57% by principal balance ($537 Billion).
At the end of 2008, 3,107 loans ($20.43 Billion) in rated CMBS transactions had defaulted on a cumulative basis. For 2008, the cumulative default rate by loan count was 4.48%, and the annual default rate was 0.76%. In terms of principal balance, the 529 loans that defaulted in 2008 had a principal balance of $4.43 Billion, significantly more than the $1.85 Billion that defaulted in 2007.
Of the major property types, office space saw the greatest increase in defaulted loans in 2008, as 389 office loans defaulted, up 30.98% from 297 in 2007.
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