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CRE Mortgage Servicers Seek up to 5 Year Extensions

By Anonymous

From Reuters: US commercial loan servicers seek longer extensions

U.S. commercial real estate mortgage servicers are seeking to extend maturing loans for up to five years in a bid to prevent borrowers from defaulting and giving up office, retail and apartment buildings at distressed levels, an industry executive said on Tuesday.
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Modifying loans has consumed the $700 billion market for commercial mortgage securities this year.
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The urgency has also risen since the fourth quarter of 2008 as special servicers have taken on hundreds of new loans due to default or a reduction in cash flow that may presage a default.

Also on CMBS from Fitch: U.S. Super Senior CMBS Expected To Hold Onto 'AAA' Ratings

While rating actions across the capital structure of many recent vintage U.S. CMBS transactions will be substantial, mezzanine and super-senior 'AAA'-rated classes are expected to stay 'AAA' for the foreseeable future, according to Fitch Ratings as it continues its review of 2006-2008 fixed-rate conduit and fusion transactions.

While rating actions on the most senior tranches are not anticipated, Fitch expects to downgrade approximately 75%-85% of subordinate 'AAA' (A-J) classes from these recent vintages as a result of its revised loss forecasts. Downgrades across all classes are expected to average two rating categories.

Fitch assumes the following factors in forecasting losses:

--Peak-to-trough value declines of 35%;

--Immediate and sustained income declines of 15%;

Unlike S&P, Fitch believes the "AAA" rated classes will not be downgraded - but a large percentage of the other classes will be cut. Note that S&P assumed current or market rents, and then decreased rents a further 6 to 30% depending upon property type. Fitch is only assuming an "Immediate and sustained income declines of 15%". We know from recent reports that incomes for hotels are already off more than 15%.

Full post as published by Calculated Risk on June 09, 2009 (boomark / email).