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TREPP, LLC: May Loan Loss Analysis: Volume Back Above $1 Billion, Loss Severity Elevates

Another block of assets that is up for auction in May and June started to flow through remittance this month, which sent volume and severity up after a lull in April. Liquidated loan volume reached $1.02 billion in May, up from $844.16 million in April. Of the loans that were liquidated, 84% (by balance) fell into the greater than 2% loss severity category.

May loss severity registered 48.94%, up nine percentage points from April’s 39.77% and just above the 12-month moving average of 47.62%. The number of loans liquidated in May was 78, resulting in $501.18 million in losses. The average disposed balance in May was $13.13 million–below the 12-month average of $14.57 million.

Since January 2010, servicers have been liquidating at an average rate of $1.21 billion per month.

Below are the overall statistics for loans liquidated from January 2010 to May 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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As we’ve noted in the past, we suspect that in many cases, 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, $859.44 million in such loans were liquidated in May. The average amount of these loans liquidated was $971.76 million over the last 53 months and $1.21 billion over the last 12 months.

The average loss severity on this basis is 58.14% for May–flat from April’s 58.84%. May’s average loss severity omitting losses of less than 2% exceeded the 54.46% average reading over the last 53 months and 53.70% 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 May’s loss numbers broken out by property type and loan size in the next few days.

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