NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Commercial Mortgage Market Metrics - U.S.A.
Credit enhancement levels for U.S. CMBS rose in first quarter-2014 (1Q'14) as underlying loan leverage increased, according to Fitch Ratings in its latest quarterly index report.
Average 'AAA' credit enhancement (CE) for Fitch-rated transactions rose by 75 basis points (bps) in 1Q'14 from the prior quarter. 'Credit protection for 'AAA' CMBS is now 150 bps higher than one year ago,' said Managing Director Mary MacNeill. Average 'BBB-' CE increased by 62.5 bps quarter-over-quarter and is 75 bps higher than 1Q'13. This comes as the percentage of loans with Fitch-stressed DSCRs below 1.0x rose to 13.4%, up from 2.9% for the same quarter one year ago.
Further, the percentage of loans with Fitch-stressed loan-to-value ratios (LTVs) above 100% rose by nine percentage points in 1Q'14 from the prior quarter to 65%. The percentage of loans having or allowing subordinate debt also increased, up by over four percentage points in 1Q'14.
Despite the worsening leverage metrics, several other new issuance measures remained in check in 1Q'14. The combined percentage of full and partial interest only (IO) loans remained relatively flat, while weighted average mortgage rates fell by 10 bps from the prior quarter.
Metrics for legacy U.S. CMBS showed continued improvement in 1Q'14. Delinquencies fell 82 bps on the quarter, while the percentage of loans in special servicing fell by 105 bps, thanks in large part to CWCapital bulk asset sales. Moreover, 'Delinquencies on CMBS 2.0 transactions have been minimal, though last quarter saw the first 2013-vintage late-pay,' said MacNeill.
Upgrades to legacy CMBS also made a comeback in 1Q'14. The number of classes upgraded rose sharply to 87, compared with just eight in the prior quarter and only 58 for all of 2013. Rating Outlooks also held steady, with nearly 93% of investment-grade Rating Outlooks Stable as of Mar. 31, 2014.
Fitch's U.S. Commercial Mortgage Market Metrics report is part of a series of structured finance index reports. The report, which includes the latest on upcoming maturities, delinquency statistics, and new issuance trends, is updated quarterly and available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.