NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) released a report Not All Loans Make the Final Cut in 2016 and subsequently, followed up with an update, Despite Turbulence, Loans Drops Flat in 2017. This report focuses on trends in loans that were dropped in the 40 KBRA rated transactions in 2017 and Q1 2018 between the time of preliminary and final feedback.
KBRA found that the amount of loan drops that occurred in full year (FY) 2017 declined to 25.1%, representing a two percentage point improvement over the prior year. While this may not come as a surprise given the decreased spread volatility in 2017, it is noteworthy, as 28.1% of conduit transaction balances changed during the year – which was up almost four percentage points from 2016. In addition, KBRA suspected the “drop” statistic would stabilize given the implementation of risk retention, particularly on the non-bank front, as it likely contributed to several entities exiting the business. This proved out, as the non-bank drop rate remained relatively stable year-over-year at approximately 31.0%, and only eight of the 14 non-bank originators in 2016 contributed loans to 2017 transactions.
Many of the trends remained the same from the prior year with some additional findings and takeaways highlighted below:
- The frequency of drops declined by over 20.0% for three property type exposures: mixed-use (declined by 29.2% as compared to prior year), office (26.1%) and multifamily (20.3%);
- The frequency of drops increased by over 20.0% for three property type exposures: self-storage (58.1%), manufactured housing community (47.5%) and retail (28.3%);
- The frequency of loan drops in loans secured by assets located in a primary market decreased by 17.0%;
- Fewer dropped loans were ultimately securitized in subsequent transactions;
- Among the dropped loans that were eventually securitized, a higher percentage of loans were contributed by a different lender.
- To the extent a dropped loan was subsequently securitized, a higher percentage of dropped loans were securitized in a shorter time span.
Please click here to view the report.
About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.