Fitch: CMBS losses down, for now

U.S. commercial mortgage-backed securities losses fell last year, though uncertain economic conditions will cloud the outlook into 2012, according to a new study from Fitch Ratings. The average loss severity, or percentage of principal lost, decreased to 53.4% last year, down from 57% in 2009. Special servicers resolved 1,427 loans, almost four times as many as in 2009, according to Fitch. In CMBS deals, when performance on the commercial real estate collateral begins to sour, a special servicer is called in as arbitrator. The ratings service also said the cumulative loss severity for last year was 42.9%, its highest level ever, and is expected to continue its rise in 2011. Loss severities were down for all major property types except retail. Office losses will likely hit historical average highs because of expiring leases, shrinking rents and continuing tenant improvements, said Fitch managing director Mary MacNeill. Hotel properties remain the second highest amount of defaults, despite improving performance. Fitch reported last month that investors expressed concern over changes at CMBS special servicers. Write to Andrew Scoggin. Follow him on Twitter @ascoggin.

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