KBRA Releases Research – Conduit CMBS Default and Loss Study: Default Volatility, Loss Stability – Press Release

Kroll Bond Rating Agency (KBRA) releases a new CMBS default and loss study that examines default volatility and loss stability. In the report, KBRA reviewed the performance of 104,247 loans generally originated for securitization from 1995 to June 2020 with an aggregate securitized balance in excess of $1 trillion. Based on performance data through 1H 2021, the cumulative default rate was at 16.8%, the cumulative loss rate 4.6%, and average loss severity 49.9%. The resolution time was 23.2 months. Almost one-third (31.5%, 508 loans) of the 2020 defaults were associated with loan modifications.

CMBS defaults have historically followed the unemployment rate. The most recent example of this was during the COVID-19 Recession, when the unemployment rate peaked at 14.8% in April 2020 and the CMBS annual default rate climbed over 9x to 7.5% for full-year 2020, up from 0.8% a year earlier.

The study also examined default rates by its property, loan, and financial characteristics. Of the major property types, lodging had the highest cumulative default rate (32.1%), followed by office (21.7%) through 1H 2021.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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