NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Originators Matter V: Loss Is in the Eye
of the Beholder (Trends, Observations and Comparisons of Conduit
A curious divide has surfaced on metrics for some U.S. CMBS deals originated in the last two years, according to Fitch Ratings in the latest report of its CMBS 'Originators Matter' series.
A recent comparison of deals rated by Fitch in 2014 and 2015 showed that originator leverage metrics improved while Fitch leverage metrics deteriorated. What's more, Fitch cash flow variance (haircuts) and debt yield also worsened an indicator of aggressive originator underwriting. 'The rise in haircuts was due primarily to our difference in views on factors such as revenue, expense, and occupancy assumptions,' said Managing Director Stephanie Petosa.
Fitch's net cash flow haircuts rose to 9.22% for full year 2015 from 8.18% for FY 2014. The average Fitch constant and cap rate, also used to calculate leverage, did not change over the period.
Nearly a quarter of the 2015 loans had a Fitch stressed DSCR below 1.00x (ranging between 0.53x and 0.99x) which resulted in an average loan-level loss estimate of 8.7%. Similarly, albeit less impactful, more than a quarter of the loans had a Fitch stressed LTV greater than or equal to 120% which averaged a loan-level loss estimate of 7.9% compared to loans with a stressed LTV less than 120% which made up 71.9% averaging a loan-level loss estimate of 3.8%.
Fitch's report compares metrics for 35 CMBS originators and provides an in-depth review of 16 loans from 2015 Fitch-rated transactions to highlight the characteristics typically found in loans with high Fitch loan-level loss estimates and loans with low Fitch loan-level loss estimates.
'Originators Matter V - Loss is in the Eye of the Beholder ' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.