NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: CMBS Originators Matter II - The Envelope
Stretches (Trends, Observations and Comparisons of Conduit Originations)
Differences among U.S. CMBS originators are continuing to emerge in recent months as interest-only (IO) loans proliferate and leverage metrics deteriorate, according to Fitch Ratings in a new report.
Since launching its inaugural 'CMBS Originators Matter' series a little over six months ago, collateral mix and loan quality continue to show declines. Fitch's latest analyzed sample of CMBS conduit loans shows a 42.4% increase in partial IO loans. Not surprisingly, originators are also increasing leverage in new CMBS loans. The most notable changes over the last several months are:
-- The increase in the average Fitch net cash flow haircut to 8.1% from
-- The decrease in Fitch DSCR to 1.17x from 1.24x; and
-- The increase in Fitch LTV to 106.7% from 100.7%.
'While many CMBS originators are continuing to push the envelope, it is important to note that other originators are showing a higher level of discipline,' said Managing Director Stephanie Petosa. The report shows significant differences among the 25 originators sampled on a range of variables.
Offsetting the decline in underwriting metrics is an increase in credit enhancement, which is averaging 23.25% on 'AAA' rated CMBS tranches compared to 21.875% at the end of 2013. This is a stance Fitch has steadfastly maintained over the last several months.
Fitch compared the lending practices of 25 CMBS conduit originators including structure, leverage, property type and location of the loans originated for 2Q'14 and 3Q'14 CMBS securitizations. 'CMBS Originators Matter II' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.