Vintage U.S. CMBS Severity Losses Still High

Liquidations of vintage securitized commercial mortgage loans continue to represent the highest severity losses in a market that is otherwise stabilizing.

In the fourth quarter of 2012, the same as in the previous quarter, the average loss on securitized commercial mortgage loans liquidated was 40.8%, according to Moody's Investors Service.

At $15.8 billion, the volume of commercial mortgage backed security loans liquidated from Jan. 1 to Dec. 15, 2012, also was the same as during 2011.

The weighted average loss severity for all liquidated loans—which excludes liquidations with losses of less than 2% that account for 23.6% of Moody's sample size by balance—was 53.1%, up from 52.7% in the third quarter of 2012.

And as of yearend 2012, according to Moody's vice president and senior credit officer Keith Banhazl, three vintages constitute 30.7% of CMBS collateral and 31.4% of delinquent loans.

The loss severity from 2006 is at 50.6%, from 2008 at 47.5% and 2003 at 43.1%.

For the 2005, 2006 and 2007 vintages, on the other hand, the aggregate realized loss currently is at 2.6%.

In 2013 the expected aggregate conduit losses for these vintages, which include realized losses, Banhazl said, “are at 7.7%, 11.2% and 13.4% of the total balance at issuance, with most of the losses yet to be realized.”

Moody's quarterly loss severities report for U.S. CMBS focuses on loss severities across the 1998 through 2008 vintages based on liquidations that took place from Jan. 1, 2000 to Dec. 15, 2012.

By property type, loans backed by manufactured housing and mobile home properties had the highest weighted average loss severity, at 48.3%, he said.

Geographically, best and worst performing areas follow historic trends with New York featuring the lowest loss severity during the quarter at 21.4% and Detroit the highest severity compared to the other metropolitan statistical areas with the highest dollar losses, at 58.7%.