Cumulative Defaults slightly lower than expectations (Fitch)

Fitch reports,

Cumulative default rate for fixed-rate CMBS increased 25 basis points to 13.2% as of the second quarter of 2012 (2Q'12). The steady increase in the default rate has so far in 2012 has been slightly better than Fitch's expectations.

Earlier this year, Fitch predicted that cumulative defaults would reach 14.5% by year end 2012. Newly defaulted loans for 2Q'12 total $2.1 billion (143 loans). Following the trend from first quarter 2012, office continues to lead new defaults at 44% with retail following at 34% by balance, respectively.

The total universe represents fixed-rate deals issued between 1993 and 2012, totaling $569 billion (excluding the Freddie Mac securitizations). Loans are considered defaulted if they have been reported 60 plus days delinquent at least once.

Mr. Obvious hired by Fitch Ratings

Fitch reports today that European Mortgage Defaults are rising.

Realpoint Delinquency Report

• 90+, Foreclosure, and REO grew for the 26th straight month - up 9% mom, 420% yoy.
• PCV/ST still current...
• RP is looking for 8-9% delinquencies in 2010, with a 11-12% potential.
• $461.8mm new workouts and liquidations in February 2010 - 61 loans, average severity 47%. 17 of these ($222.2mm) had severities near or below 1%
• Worst severities in Healthcare (44%) and Industrial (50%) - Multifamily had the highest defaults though.
  

Month	Loss Severity
Feb-10	46.90%
Jan-10	48.10%
Dec-09	52.70%
Nov-09	45.70%
Oct-09	52.00%
Sep-09	40.60%
Aug-09	37.70%
Jul-09	31.30%
Jun-09	39.60%
May-09	35.20%
Apr-09	31.10%
Mar-09	50.70%
Feb-09	23.60%
Jan-09	37.10%

Bad Comparisons - MBA Edition

The MBA is out with their little delinquency chart that tells you nothing. It's like saying the apples at the corner market cost more than the steak at the butcher?!?! I know that they now disclaim as much, but why bother putting out a useless chart in the first place.

I'm not sure why they don't just put out a chart that compares, say, 60+ day delinquencies for each lender group. I've asked, and they claim not to have the data, which makes me wonder where they get the data from that they do have - any source should have both.

A Closer Look at Five Random CMBS Loans

ZeroHedge took a close look at five failing CMBS loans, and clearly laid out their reasoning and loss expectations.

I'd be curious to see them draw a more distinct line between the fundamental analysis and valuation of the actual bonds. Things feel a little rich now, but I still feel like there are some good values in 2006 and later vintages at some points in the capital stack.

The Belnord stuck out as one of the rent-control flips. Here is an abbreviated list from a BOA report that lists some more big ones. The actual report had several pages more - it'd be interesting to see where those all stood today.

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.

Bad News Picks Up

There's a concerted uptick in bad CRE news hitting the wires. I think it started with the Journal's Peter Cooper Village/Stuyvesant Town article earlier this week - nothing new there, except that they took a little less out of their debt service reserve last month than the month before (but the article didn't highlight that). I still think it is a 2009 default, but who knows, it could 2010.

Sheila Bair stated that new CRE focused plan/guidelines is in the near-term pipeline. The title of the WSJ article is worded badly - is it a bailout or just new guidelines?? It's like a media firm starts getting to the top of its game (CNBC, WSJ #1 in readership) and

Capmark will be filing bankruptcy before Halloween!

Union Square W is owned by Istithmar, and may be the next big default. - ZH points out that a lot of Istithmar owned properties were purchased at precisely the wrong time. Maybe we'll publish a list ...