Fitch: Drop in Specially Serviced US CMBS Positive, Risks Remain via MarketWatch

The steep reduction in the balance of U.S. CMBS loans in special servicing is encouraging, Fitch believes, but this trend may intensify some of the conflicts of interest that special servicers have wrestled with. It also may be difficult to maintain over the long run, as the balance remains high and a large number of maturities are due in 2015-2017. According to data collected by Fitch, CMBS loans in special servicing dropped by almost $6.0 billion to $74.8 billion at the end of 3Q12. This balance peaked in 2010 at $91.7 million.

We believe that a similar magnitude reduction in the number of assets per special servicer asset manager and the balance of loans transferred into special servicing has allowed these companies to reduce their headcounts and operate at more reasonable levels. Over the past year, the average number of assets per asset manager has declined from 20 to 12. As recently as 2010, one special servicer had nearly 50 assets per manager. We expect the reduction in loan volume and increase refinancing opportunities to continue in the short term.

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