Fitch: Default Not Always Imminent For Recent Special-Servicing Transfers

While most commercial mortgage-backed securities (CMBS) loans transferring to special servicing are driven by borrowers looking to prevent future defaults, select recent transfers are showing something else entirely, according to Fitch Ratings.

Most CMBS loans now in special servicing are there due to an ‘imminent default,’ which Fitch calls ‘an opaque, catch-all classification that provides little color on what circumstances precipitated the transfer.’

According to Adam Fox, a senior director at Fitch, some borrowers are transferring loans to special servicing to capitalize on current market conditions.

‘Some of these more opportunistic measures are designed to extend a loan term, bring down leverage or save on out-of-pocket expenditures,’ he says.

Twenty-one loans with balances greater than $20 million transferred to special servicing during October, the rating agency reports. The loans, the majority of which correspond to 2005-2007 vintages, range in balance from $21.5 million to $187.2 million.

More 3,000 loans with an outstanding balance of approximately $59.4 billion in Fitch's portfolio were classified as specially serviced through the end of last month.

SOURCE: Fitch Ratings


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