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TREPP: January Loss Analysis: Volume Steady, Severity Jumps

CMBS liquidation volume remained steady in January, but several large losses pushed the average loss severity up significantly. Liquidation volume registered $1.28 billion in January, equal to December’s volume and slightly above the 12-month moving average of $1.19 billion. Of the loans that were liquidated, 94% fell into the greater than 2% loss severity category.

January loss severity came in at 58.51%, up from December’s 50.36% and more than 10 percentage points higher than the 12-month moving average of 46.82%. The number of loans liquidated in January was 79, resulting in $746.85 million in losses. The average disposed balance in January was $16.16 million–well above the 12-month average of $12.56 million.

Since January 2010, servicers have been liquidating at an average rate of $1.18 billion per month.

Below are the overall statistics for loans liquidated from January 2010 to January 2014. The first table includes only US fixed-rate conduit loans. (If a loan somehow managed to be liquidated with a profit or at par, we excluded the loan. If the loan suffered a loss of $1 or more, it is included in the numbers below.)

Loan Liquidations since January 2010 – US Fixed Rate Conduit Loans – All Loans

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If one takes out the loans with losses of less than 2%, the story looks a little different. As we’ve noted in the past, we suspect that in many cases, the small loss loans are actually refinancings that have taken place where the losses reflect small, unpaid special servicer fees or other costs. On this basis–after taking out the “small loss” loans–$1.21 billion in such loans were liquidated in January, compared to an average of $930.61 million over the last 49 months and $1.02 billion over the last 12 months.

The average loss severity on this basis is 61.86% for January–up from December’s 55.44%. January’s reading fell in line with the 54.78% average monthly loss severity omitting losses of less than 2% over the last 49 months and 54.39% over the last 12-months.

Loan Liquidations since January 2010 – US Fixed Rate Conduit Loans – Losses > 2%

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Next are the loss severity numbers by vintage. The first table includes all liquidations, while the second excludes loans with losses of less than 2%.

Loan Liquidations since January 2010 by Vintage – US Fixed Rate Conduit Loans – All Loans

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Loan Liquidations since January 2010 by Vintage – US Fixed Rate Conduit Loans – Losses > 2%

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Look for January’s loss numbers broken out by property type and loan size in the next few days.

 

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