Leverage and other key metrics for U.S. CMBS slipped again in the second quarter, driving credit enhancement (CE) levels for new deals higher still, according to Fitch Ratings in its latest quarterly index report.
Average 'AAA' CE for Fitch-rated transactions rose to 24% in 2Q'14, up 1.125 percentage points from the prior quarter and 2.375 percentage points from one year ago. 'Fitch has quoted credit enhancement above 25% on several deals it ended up not rating, which begs the question of whether super senior credit enhancement will soon be poised for a move above 30% if the trend continues,' said Managing Director Huxley Somerville. Meanwhile, average 'BBB-' CE increased by 25 basis points (bps) quarter over quarter and is 100 bps higher than 2Q'13.
The higher CE comes as the percentage of loans with Fitch-stressed DSCRs below 1.0x rose to 16.4%, up from just 1.9% for the same quarter one year ago. In addition, the percentage of loans with Fitch-stressed loan-to-value ratios (LTVs) above 100% rose by over five percentage points in 2Q'14 from the prior quarter to 71%. The percentage of full term interest-only (IO) loans also rose by almost five percentage points last quarter to 20.5%.
Several other new issuance measures remained in check in 2Q'14, including the exposure to retail properties at 31%, which is the same as the previous quarter and last year. Also, the exposure to the southeast region declined, while the exposure to the Mid-East increased, which includes the
As new issue metrics continued to decline, metrics for legacy U.S. CMBS continued to improve last quarter. Delinquencies fell 29 bps on the quarter, while the percentage of loans in special servicing fell by 34 bps. Upgrades to legacy CMBS rose in 2Q'14, led by 2004 and prior vintage transactions as they paid down. Similarly, Rating Outlooks also held steady, with nearly 94% of investment-grade Rating Outlooks Stable as of
Fitch's U.S. Commercial Mortgage Market Metrics report is part of a series of structured finance index reports. The report, which includes the latest on upcoming maturities, delinquency statistics, and new issuance trends, is updated quarterly and available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.
Source: Fitch Ratings
Most Popular Stories
- U.S. Families 'Extraordinarily Vulnerable': Yellen
- Larry Ellison Steps Down as Oracle CEO
- Apple Locks Itself Out of Devices
- Alibaba Prices IPO at $68 a Share
- Hillary Clinton to Address CHCI Conference
- Veterans to Get Training as Solar Panel Installers
- Hispanics Doubt Marco Rubio's Chances
- Wildfires Rage in California
- John Cantlie Delivers ISIS Message to Save Life
- Alibaba: Today China, Tomorrow the World