Fitch Ratings said its North America CMBS rating actions in the second quarter demonstrated continued stabilization with property cash flows recovering from their pandemic lows, higher recovery prospects on specially serviced loans with improved valuations, more loans being resolved and returned to the master servicer, and better than expected recoveries on dispositions.  

However, the rating agency says, “deteriorating macroeconomic conditions and rising headwinds may slow the post-pandemic recovery.” 

The vast majority of rating actions in 2Q22 were affirmations at 94% (2,254 classes of CMBS), up from 91% in 2021 and 85% in 2020. Few downgrades (4%; 86 classes) occurred and no Negative Watch rating signals were assigned in the quarter. Only two affirmed classes (0.1%) with prior Stable Outlooks had them revised to Negative, says Fitch. 

All the downgraded classes had previous Negative Outlooks or already had a distressed rating prior to the downgrade. Approximately 86% of downgrades were concentrated in below-investment-grade classes. Investment-grade downgrades were limited to five transactions driven mainly by a greater certainty of higher losses from lower-tier regional mall exposure