CMBS Defaults Rising and Survey Shows Conservative Investor Outlook, Says Fitch


U.S. senior fixed-income investors are taking a more conservative view of cross asset credit conditions on the back of recent macroeconomic concerns, according to a Fitch Ratings fixed-income forum survey of fixed income professionals, conducted in June.

Like what you see? Click here to sign up for a National Mortgage News free trial and daily newsletter to get the latest feature stories, news headlines, data, and in-depth analysis on the issues impacting the mortgage industry.

Investors expressed a more downbeat view of U.S. growth. In January, 43% of investors saw growth above 3% over the coming year. Now, however, they are roughly split (51%/47%) between those that believe U.S. growth will be moderate—in a range of 2% to 3%—and those expecting weaker growth of below 2%.

Improving labor market conditions received more attention than in prior surveys as a factor critical to the U.S. recovery, more so than financial stability in the Euro zone or home price stabilization. The majority of the investors participating in the survey (48%) said they still saw an 8%-9% U.S. unemployment rate by year-end 2012.

Professional money managers surveyed consider the sovereign debt crisis the top risk factor. Inflation fell further off the radar as a near-term worry. The prospect of weaker economic growth manifested itself in the outlook for specific industries and spreads.

The survey results also showed that areas that previously had a majority of respondents predicting spread tightening, now carry a more balanced view. These included speculative grade corporates and some structured areas, particularly CMBS.

Meanwhile, in another Fitch analysis, the credit rating agency said the U.S. CMBS default rate jumped to 12.9% at the end of the second quarter of 2011, marking a 228 basis point increase since the end of 2010.

“Highly leveraged loans from recent vintage CMBS are also still defaulting at an elevated rate,’ said Fitch Managing Director Mary MacNeill.

The report noted that the default rate for each vintage from 2005-2008 spiked over 200 basis points since the end of 2010, with 2007 gaining the most with a 549 basis point jump. The largest four newly defaulted loans were originated in 2007, Fitch stated.

New defaults have declined this year, dropping 59% from 1Q11 to $4 billion. The rating agency said $9.95 billion in new fixed rate conduit CMBS has been rated by Fitch in 2011.

Daily Briefing | Monday, August 1, 2011

  • Aurora Loan Services For Sale – Again

    The ‘on-again/off-again’ sale process has started once again for Aurora Loan Services, the Colorado-based mortgage banking division of Aurora Bank FSB, according to industry officials.

  • Yield on Benchmark 10-Year Falls, But Will Consumers Refi?

    In the wake of a political deal to solve the nation’s debt ceiling crisis, the yield on the benchmark 10-year Treasury fell to 2.7% Monday, which usually means mortgage rates are headed south as well.

  • Mortgage Lender Sued for Misrepresenting HUD Insured Loans

    MDR Mortgage and its founder and president Robert Luce are facing a lawsuit filed by the Department of Justice for the alleged misrepresentation of Department of Housing and Urban Development-insured loans.

  • Warehouser Funds 1,000 Loans in Quarter

    Silvergate Bank, La Jolla, Calif., said its warehouse lending program funded over 1,000 residential mortgage loans totaling $267 million in the second quarter.

  • Study: Homeowners Still Dissatisfied with Mortgage Servicers

    Homeowners who originated their mortgages during the peak of the housing boom with unfavorable loan terms are getting more frustrated with their inability to refinance with mortgage servicers, according to the J.D. Power and Associates 2011 U.S. primary mortgage servicer satisfaction study.

  • A Second Buy for Security Firm

    Homeland Security Capital Corp., Arlington, Va., has made its second acquisition in the mortgage and settlement services space by buying Timios Inc., a nationwide provider of title and escrow services for $1.15 million, plus contingency payments of up to $1.35 million over the next 12 months.

  • CMBS Trading Heads Depart Goldman, Citigroup

    The heads of CMBS trading at Citigroup and Goldman Sachs departed from their respective firms late last week.

  • CU Companies Introduces Correspondent Program

    CU Companies, a mortgage service organization owned by credit unions in the New Brighton, Minn. area, has launched a correspondent purchase program for member institutions.

  • Amherst Examines BofA Settlement’s Impact on Securities Valuations

    A new report by Amherst Securities Group examines how the recent Bank of America settlement has the potential to significantly impact Countrywide securities that comprise the Covered Trusts. Although the market seems to treat these securities in the same way, Amherst said that the impact will vary from security to security.

  • Judge Dismisses NCUA Case Against WesCorp Directors

    In a major defeat for the National Credit Union Administration, a federal judge Friday agreed to dismiss negligence charges brought by the federal regulator in a civil suit against 11 directors of the one-time $34 billion corporate credit union, all of them prominent figures in the credit union movement.

  • Texas Tech FCU Inks Deal For MRG’s Mortgage Doc Solution

    Texas Tech Federal Credit Union in Lubbock has chosen MRG’s Miracle Online platform for its mortgage document preparation needs.

  • Ariz. State CU Signs Up For Fannie Mae’s HomePatch REO Loans

    Arizona State CU has begun offering its members low-down payment, low-rate loans to buy homes currently owned by Fannie Mae, the Phoenix-based credit union said.

Leave a Reply