Fitch Ratings, apparently concerned on older vintages of commercial mortgage-backed securities (CMBS) transactions with upcoming maturities, has came out with a new report, warning that further deterioration in real estate fundamentals is expected over the next 18 to 24 months.
In the current RE environment it is hard that any property type in any market will not have some downward pressure. And vintages are no exception. In the more recent vintages of 2006-2008, it is the higher leverage loans that will most likely cause increased delinquencies. Logically, borrowers will be hesitant to keep feeding a deteriorating asset, when what little equity they had in the property is likely gone. It seems the pain in the housing keeps spreading.
Here is more data on Fitch’s report:[BW]”Large loan floaters, pre-2000 vintage CMBS, and deals originated in the latter half of 2005 will be most susceptible to downgrades,’ said Managing Director Mary MacNeill. ‘It should be noted that the magnitude of these expected negative rating actions will not be as significant as that of recent actions already taken on later vintages.’
With recent vintage CMBS encompassing nearly half of the Fitch-rated universe and among the weaker performing deals, Fitch expects approximately 90% of its entire rated CMBS portfolio to retain investment grade ratings once all reviews are complete. While Fitch expects these older vintage transactions to perform better from a ratings standpoint, ‘it is now evident that all CMBS vintages are susceptible to the severe economic conditions of the past two years,’ said MacNeill.
Fitch’s third-quarter review of 2006-2008 CMBS deals, which concluded earlier this month, resulted in rating affirmations on 80% of the tranches by balance (totaling $186.1 billion), and downgrades for the remaining 20% ($44.3 billion). Fitch expects few additional near-term negative rating actions among these 78 deals.”
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