Moody's: US CMBS liquidated loan loss severity slightly higher in third quarter

From October 1, 2011 to September 15, 2012, $15.7 billion of CMBS loans were liquidated, up $1.2 billion over the same period the previous year, says Moody's.

The weighted average loss severity for all liquidated loans excluding those with de minimis losses (defined as losses of less than 2%) was 52.7%, an increase from 52.3% last quarter, says the rating agency report. Loans with losses of less than 2% account for about one fifth of the sample size.

"Loans backed by manufactured housing and mobile home properties had the highest weighted average loss severity, at 48.5%, while loans backed by self-storage properties had the lowest weighted average loss severity, at 33.8%," said Moody's Vice President and Senior Credit Officer Keith Banhazl.

He said total cumulative realized losses from the 1998-2008 vintages rose 21 basis points in the third quarter, to 2.3% from 2.1% in the second quarter. The 2000 CMBS vintage had the highest cumulative loss rate, 4.3% in the third quarter, up from 4.0% in the second quarter; the 2001 CMBS vintage had the second-highest cumulative loss rate, 3.5%, up from 3.3%.

Of the 10 metropolitan statistical areas (MSAs) with the highest dollar losses, New York had the lowest severity, at 22.9%, Detroit, the highest, at 59.2%.

Two notable liquidations took place during the quarter. The Westin O'Hare loan, backed by a hotel in Chicago, liquidated with a $83.5 million loss, for a loss severity of 83.2%, and the Highland Mall loan, backed by a regional mall in Austin, Texas, liquidated with a $73.2 million loss, for a loss severity of 120.0%.

The three vintages with the highest loss severities are 2006, at 48.8%, 2008, at 48.0%, and 2007, at 45.0%. These vintages constitute 56.7% of CMBS collateral and 73.8% of delinquent loans.

"For the 2005, 2006, and 2007 vintages, we expect aggregate conduit losses (inclusive of realized losses) of 7.6%, 10.8% and 13.0%, respectively, of the total balance at issuance, with most of the losses yet to be realized," said Banhazl. "The aggregate realized loss for those vintages is currently below 2.5%."

Moody's quarterly loss severities report for US CMBS tracks loan loss severities upon liquidation and cumulative deal losses in US commercial mortgage backed securities (CMBS) conduit and fusion transactions. The latest quarterly report details loss severities across the 1998 through 2008 vintages based on liquidations that took place from January 1, 2000 to September 15, 2012.

This report is available to Moody's subscribers at http://www.moodys.com/research/US-CMBS-Loss-Severities-Q3-2012-Update--PBS_SF308805

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Keith Banhazl Vice President - Senior Analyst Structured Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Michael Gerdes MD - Structured Finance Structured Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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