Losses Remain Low for CMBS

A study of loan losses on commercial mortgage-backed securities by Fitch Ratings finds that the overall dollar losses as of year-end 2002 in the transactions studied amount to only 0.17% of the total loan balances in Fitch-rated conduit, large loan and fusion CMBS transactions.

The rating agency expects losses by the end of this year to remain under 0.20% of the total conduit collateral, an amount that Fitch sees as "insufficient to impact CMBS investment grade classes."

Loans resolved through a servicer-negotiated discounted payoff had an average loss of 28.9%, with an average resolution time of 11.9 months, while loans that became real estate-owned had an average loss severity of 64.3% and took 23.4 months to resolve. However, "DPO resolutions are less likely to be available as an option" on older, obsolete or in a declining market, Fitch said.

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