Tuesday, October 20, 2009

Losses will increases for CMBS!!! Read All About It!

I don't know if you heard, but CMBS losses are expected to be higher than historical averages! Apparently it is caused by longer workout periods?!? according to the chick below who regurgitates it for Bloomberg:

Oct. 20 (Bloomberg) -- Losses on commercial mortgage-backed securities are forecast to increase in severity due to a more than threefold increase in the time it takes to restructure underperforming loans, according to Fitch Ratings’ latest annual report on CMBS.

She's not alone, the official press release says:
It should be noted that other property types other than multifamily collectively make up a significantly smaller piece of the CMBS loan universe.

Multifamily does not make up more than the all the other sectors put together. The loss severity Fitch is referring too is in line with historical averages even during good times - mid 30% area. Of course it is going to get worse. The only interesting part is that they believe workout periods will multiply by 3 on average - that means it will take nearly 4 years to work out defaulted loans. If you could put any stock, at all, in anything that Fitch says today, that would be worth something. I think they're probably off by about 2 years (too long), though.

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