Fitch: $74B Backlog Awaits CMBS Special Servicers

The good news: According to Fitch ratings, CMBS special servicers are making tracks through distressed loans and resolved approximately $8.7 billion in 2009. The bad news: There’s a long way to go.

March 15, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user yomanimus

Do you want the good news or the bad news first?

The good news: According to Fitch ratings, CMBS special servicers are making tracks through distressed loans and resolved approximately $8.7 billion in 2009. The bad news: There’s a long way to go.

Though some loans have successfully been resolved, those only represent 11 percent of the amount in special servicing at year-end 2009. Approximately $74 billion is left to be resolved. In addition, while CMBS servicers resolved more than 50 percent more loans in 2009 as compared to a year earlier, the percentage resolved has fallen from 31 percent to 11 percent. Fitch says this can be attributed to a major increase in loans hitting special servicing.

Fitch managing director Stephanie Petosa said in an email report that recoveries on loans with losses are down markedly compared to prior years. In 2009, overall average recoveries were 87 percent, which was down from the year before.

Three-quarters of specially serviced loans have been modified and sent back to the master servicer either modified and now performing or paid-in-full with almost no losses, Fitch said. However, the company cautioned that modifications may not prevent a return to special servicing. “The health of the property, the borrower and the credit markets will dictate how successful the remedies are at keeping loans out of special servicing,” Petosa said in the email report.