Fitch-rated underperforming CMBS loans transferred to special servicing so far this year have experienced a sharp, 38 percent decline compared with last year.
About $4.3 billion (383 loans) worth of underperforming loans have transferred into special servicing through October of this year, a decline from nearly $7 billion transferring in each of the last two years.
Additionally, special servicers are continuing to liquidate specially serviced assets.
“These are trends Fitch expects to continue into 2016 so long as commercial real estate liquidity remains strong and interest rates remain low,” the statement went on. “With the ratio of assets to asset manager likely to continue declining, this should free up special servicers to focus more time on surveillance, particularly for pending maturities in 2006-2007 vintages and any idiosyncratic issues that arise on 2.0 loans.”
Despite that positive outlook, Fitch noted in October that, despite recent signs of stabilization, underperforming CMBS retail assets in secondary and tertiary markets were worth keeping an eye on, as they could face a slow recovery going into 2016 if retailers experience a weak holiday season. In June the ratings agency had noted similar trouble that ailing malls could face as vintage loans come due.
And in June the agency noted disparities in underwriting standards between large, small and non-bank US CMBS originators, which have led to an “overall decline in credit quality in recent months.”