Less than 3% of the 13,419 U.S. structured finance securities issued since 1993 have defaulted, according to a study by Moody's Investors Service.The structured finance default study included 167 asset-backed securitizations, 80 commercial mortgage-backed securitizations, and 143 residential mortgage-backed securitizations. While gross payment defaults are "the simplest measure of performance," according to Moody's analyst Jian Hu, defaults are often cured within a short time in the structured finance arena. Therefore, the rating agency also tracked securities that defaulted and were not subsequently cured, finding that only 94 of the 390 defaults during the study period were later cured. The study found that the average loss severity rate for the 84 securities that defaulted was approximately 42% of their original balances. In the CMBS arena, the study identifies interest shortfalls as the cause of all the defaults to date. Most recent defaults have been "precipitated by appraisal reductions and special servicing fees," Moody's said. Other causes of shortfalls include loan modifications, unanticipated terrorism insurance expenses, and legal expenses. However, losses on CMBS defaults so far have been "extremely low," the rating agency said. Moody's can be found online at http://www.moodys.com.
