Small Banks, Nonbanks Originating Weaker-Quality CRE Loans: Fitch

Small banks and nonbank lenders are originating commercial mortgages with lower credit quality than the loans originated by large banks, according to a Fitch Ratings report.

In a report that measured commercial originations based on five different areas, small banks and nonbank lenders exhibited lower credit quality in their underwriting.

"CMBS investors are becoming increasingly concerned about the ability of conduit originators to maintain credit quality given the growing number of loan originators," Stephanie Petosa, managing director, said in a news release.

Fitch also found that both credit enhancement declined and collateral credit quality either remained the same or decreased in four recent deals that Fitch did not rate. Typically, credit enhancement will increase when loan quality slips.