Eight U.S. commercial mortgage-backed security (CMBS) loans with balances greater than $20 million due to mature next month are likely to default, according to Fitch Ratings in its latest U.S. CMBS weekly newsletter. Two-thirds of these Fitch-rated loans were originated in 2005.
"These five-year interest-only loans with below market rates are proving to be difficult to refinance in today's lower leverage and higher mortgage rate environment," notes Adam Fox, senior director at Fitch.
Despite its concerns about near-term maturities, Fitch says it does not expect negative rating actions for recent-vintage transactions.
"Fitch's surveillance methodology already recognizes 100% of potential losses from near-term maturing loans that do not pass a refinance test," says Fox.
Of the 772 Fitch-rated fixed-rate CMBS (representing $7.7 billion) slated to mature between Aug. 1 and the end of this year, 93 loans representing $1.7 billion (22.9%) are in special servicing.
The lack of liquidity in the market for refinancing mortgages coming due raises the likelihood of a special servicing transfer for a modification or extension, Fitch adds. This may translate to more loans going into special servicing for the loans maturing for the remainder of 2010, which Fitch outlines as follows:
