Underwriting on CMBS loans is loosening as originators compete for more business in a sector that’s starting to heat up again.
“The first transactions to emerge from CMBS 2.0 were very conservative in most facets, benefiting an industry emerging from a very stressful period,” said Huxley Somerville, group managing director and head of U.S. CMBS for Fitch. “However, standards, not surprisingly, are beginning to loosen as competition amongst originators intensifies and the economy continues to rebound.”
In the past year, CMBS loan attributes have moved from being very conservative to more traditional, while still healthy, according to Fitch.
In March, 55.5% of CMBS loans paid off when they reached their balloon date, making it only the second time in 27 months for the payoff percentage to crack 50%.
Comparatively, the average percentage of loans paying off each month held at about 36.7% this past year.
Trepp said larger loans tended to payoff in a more “timely fashion” in March, suggesting that “larger loans and trophy properties are having an easier time finding financing in the current environment.”
Before the onset of the 2008 financial meltdown, payoff percentages remained above 70% on average, Trepp said.
Source: Housing Wire