Commercial mortgage-backed securities servicers have held on to real-estate owned properties for longer than usual, which could lead to a reversal in the declines in liquidations seen recently, according to a Fitch Ratings study.
In 2014, aggregate losses for servicers from REO liquidation fell to 49% from 54% the year prior, including sales at foreclosure. Despite this trend, aggregate losses could rise due to the advanced age of the REO assets that remain in special servicing, Fitch said in its latest newsletter released March 23.
The REO inventories in question got to their increased age due to a number of factors, particularly the completion of judicial foreclosures that began years ago and the adverse selection of remaining REO properties.
Fitch also reported that REO portfolio declines have moderated as compared with the rapid growth in the number of CMBS loan resolutions in the past year. At year's end, 2,264 CMBS loans, or $38.5 billion of unpaid principal balance, remained in special servicing as compared with 2,879 CMBS loans totaling $49.5 billion at the close of 2013.
