ing a substantial jump in the first quarter of 2009, loan defaults for U.S. commercial mortgage backed securities (CMBS) are expected to exceed 5% by the end of this year, according to Fitch Ratings in its latest annual default study of commercial mortgages underlying its rated CMBS transactions. First-quarter defaults reached $2.6 billion, compared to $3.2 billion for all of 2008, according to Managing Director Mary MacNeill. ‘If the rate of defaults continue at this accelerated pace combined with limited issuance in 2009, the cumulative default rate will exceed 5%,’ she says. As of year-end (YE) 2008, the cumulative default rate increased to 3.29% from 2.71% in 2007. Fitch expects the rate of defaults to increase consistent with the levels of defaults in the last six months. Larger loans in the 2006 and 2007 vintages have begun to default, and Fitch expects this trend to continue in 2009 as the slow economy and lack of financing contribute to cause stress in commercial loan performance. Multifamily properties represented the highest of all property defaults in 2008 with $1.06 billion in new defaults and a default rate of 5.21%. Retail defaults increased significantly to $1.03 billion with a default rate of 2.52%. Fitch expects both multifamily and retail to lead defaults by the end of 2009. SOURCE
