Tag Archives: Fitch Ratings

Increasing struggles for office properties, most notably in Atlanta, overshadowed what was otherwise a flat February for delinquencies among loans held in commercial mortgage-backed securities (CMBS), according to the latest index results from Fitch Ratings. By the agency's assessment, CMBS late-pays fell two basis points last month to 8.30 percent. The decline was led by a large hotel loan - Innkeepers - that was brought current. Fitch's delinquency index includes 2,536 loans totaling $32.6 billion.

Home prices across much of the country are still overvalued, but the gap is narrowing, according to Fitch Ratings. The agency has revised its Sustainable Home Price (SHP) model, and the results show that residential property values are now on track to fall an additional 9.1 percent nationally before arriving at a level that is supported by market fundamentals. Though home prices are falling nationally, Fitch notes that price movement in some regional markets is still quite volatile due to the volume and pace of distressed sales being processed.

Despite recent reports of modest improvement in the health of the housing economy, Fitch expects the real estate sector to continue to depress the performance of banks, according to Fitch Ratings. Residential real estate is the largest exposure for banks since they make up $2.5 trillion, or roughly one-third of total loans, according to the agency. Home equity represents about 30 percent of this amount, with 1-4 family first lien mortgages making up the balance.

Analysts at Fitch Ratings expect to see a sharp rise in the cost to service mortgage loans. They describe the housing recovery in the U.S. as ""unhurried"" and as a result, they say lenders have been forced to shoulder higher foreclosure expenses. Fitch says increased foreclosure costs compounded by credit, compliance, regulatory, and other real-estate owned expenses are beginning to have a profound effect on the industry. The agency estimates the cost of servicing nonperforming loans is likely to double from pre-crisis levels.

November marked the fourth straight month that Fitch Ratings has recorded a decline in the delinquency rate for loans held in U.S. commercial-backed mortgage securities (CMBS). CMBS late-pays fell by 15 basis points to 8.41 percent, as new delinquencies totaling $1.8 billion were offset by $2.2 billion of resolutions. Behind the positive numbers, though, Fitch says the performance of CMBS collateralized by office properties remain an area of concern, with more than half of all new delinquencies stemming from office loans.

Citing data from Lender Processing Services estimating more than 2 million properties in some state of foreclosure, Fitch Ratings says REO sales - both single-property and bulk sales - will be an integral component of the housing market over the next two years. However, the timing and method of disposition will have significant implications for home prices, according to Fitch. The agency notes that distressed properties generally sell at a substantial discount, further exacerbated by the presence of excess inventory.

Foreclosure starts among private-label residential mortgage-backed securities (RMBS) have been rising toward historic averages, which will lead to an influx of distressed properties bringing downward pressure to the housing market, according to Fitch Ratings. Foreclosure starts among loans that have been delinquent for six months or more have almost doubled in the past five months. Fitch says it's a sign that servicers are playing catch-up on actions that have been delayed over the past year.

Special servicers resolved $63.5 billion in distressed commercial mortgage-backed securities (CMBS) loans in the 18 months from January 2010 to June 2011, according to Fitch Ratings. This amount is more than three-fourths the amount resolved between 2007 and 2009. Modification is the most common resolution strategy for larger balance loans. Fitch reports that the recovery rate for CMBS loans resolved by special servicers has remained at or better than 86 percent since 2007.

The number of loans held in commercial mortgage backed securities (CMBS) resolved by special servicers in 2010 was more than four times the amount in 2009, according to Fitch's CMBS loss study released Wednesday. The company says special servicers have been increasingly successful selling properties and working with borrowers for discounted loan payoffs. However, despite this positive movement, Fitch remains uncertain what next year will bring amid current economic uncertainty.

The analysts at Fitch Ratings warn that before the housing market pulls out of this downturn, half of prime borrowers could wind up underwater on their mortgage. Data released last month by CoreLogic shows that one in five of all residential mortgages in the U.S. is in a negative equity position. But segment out just those homeowners with prime mortgages, and Fitch says one in three currently owe more on their mortgage than the home is worth.