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2021 Saw Fewer CMBS Loans Resolved with Losses
Although 2021 saw a dramatic increase in total CMBS loan resolutions from prior years, only 25% of those loans were disposed of with losses as special servicers resolved a high number of pandemic-related transfers, according to Fitch Ratings in its latest annual U.S. CMBS Loan Loss Study.
“Fitch expects the trend of increased resolution activity to persist in 2022 as the U.S. commercial real estate markets continue to move beyond the initial disruption caused by lockdowns related to the coronavirus pandemic,” said senior director Karen Trebach.
Total 2021 resolutions increased to $15.5 billion from under $8 billion in each of the prior three years. Almost 75% of the total loan resolutions were resolved without losses or returned to the master servicer, compared with two-thirds in 2020. Approximately 60% of the resolutions that returned to the master servicer were modified or granted some form of consent or forbearance; the balance were either denied relief or withdrew the request for relief.
The loss severity for the $3.1 billion in loans disposed with losses in 2021 was 56%, compared with $1.9 billion disposed in 2020 at 55.5% loss severity. When not weighted by loan size, the 2021 average loss severity for these loans is 43.1%. This is because smaller loans with lower loss severities dominated resolutions in 2021.
Approximately 80% of all resolutions and 80% of all loans with losses were either retail and hotel loans, with both sectors seeing a noticeably higher number of resolutions compared to 2020, said Fitch.
- ◦Financing
