Commercial real estate loans are spending more time in special servicing, according to new data released by Fitch Ratings.
The rating agency reports that the number of months in special servicing has increased to 16.9 months on average as of the end of 2011, up from 12.8 as of the end of 2010 and 9.02 as of the end of 2009. Fitch attributes the increase in time to several factors, including unprecedented transfer volume, varying available liquidity and the complexity of the larger loans that characterize the transfer volume.
Fitch Ratings has determined that special servicers worked out approximately $83.1 billion in loans as of year-end 2011, compared to the high of $91.2 billion in the second quarter of 2010. Despite the increasing trend of transfers to special servicing, Fitch Ratings found that the volume of loans in special servicing has been declining because the peak due to loans either returned to performing status or were liquidated.
The majority of loans – 53%, or $44.9 billion – moved out of special servicing during the 2010-2011 period and have been modified and returned to master servicing.
‘Fitch Ratings expects this trend to continue as the number of transfers to special servicing appear to be increasing,’ says the rating agency. ‘Transfer volume for year-to-date 2012 is over $5 billion, representing over 100 loans. Also contributing to volume will be the five-year loans originated in 2007 that are coming due this year.’