Fitch Sees Greater Risk for Large CRE Loans

The number of large commercial real estate loans going into default is on the rise, according to Fitch Ratings. In December, the delinquency rate on loans packaged into commercial mortgage-backed securities rose to 0.88%, Fitch said, due in large part to the default of two loans with balances greater than $100 million. In November, two loans greater than $70 million went into default, and Fitch managing director Susan Merrick expects more large CMBS loans to go into default. "What began as weakness in the performance of smaller properties located in tertiary markets now includes larger collateral in secondary and primary markets," she said. Fitch also noted that young loans from 2008 CMBS deals are seeing defaults rise at a historically fast pace. Fitch blamed high leverage on loans in recent CMBS vintages coupled with the economic recession for the rising default rate. Fitch predicts the CMBS default rate will rise to about 2% by the end of this year.