Fitch: Specially Serviced CMBS Loans Drop to Three-Year Low

The combined effect of lower volumes of underperforming loans and improved workout practices helped improve the traffic of delinquent, securitized commercial mortgage loans that go in and out of special servicing, according to Fitch Ratings.

As a result, the number of delinquent CMBS under special servicing dropped to its lowest level in three years.

The latest quarterly index from Fitch Ratings shows the volume of specially serviced CMBS fell to $70.6 billion as of Dec. 31, 2012.

After peaking at $91.7 billion in 2010, it represents “the smallest population since the run up” at yearend 2009 when the balance of specially serviced CMBS loans was $74 billion, Fitch said.

Special servicers are continuing to make progress on working out delinquent U.S. CMBS, said Fitch’s managing director Stephanie Petosa. In her view the most encouraging sign is that the volume of CMBS loans going in to special servicing and the CMBS coming out of a workout now are aligned.

In 2012, $49.9 billion in loans were transferred into special servicing compared to $47.1 billion coming out.

“This is a notable contrast from 2009,” when $74.9 billion transferred in with only $8.8 billion transferring out, she said.

The quarterly U.S. CMBS Special Servicing Index is a recent addition to a series of structured finance index reports Fitch is rolling out.