U.S. commercial mortgage-backed securities loans in special servicing fell below $70 billion for the first time in three years and now make up less than 10% of all outstanding CMBS, Fitch Ratings said in a new report.
The specially serviced CMBS loan universe declined to $64.2 billion in late March.
Despite the overall balance of CMBS loans in servicing edging lower, fewer loans transferred out of special servicing during the first quarter, Fitch said.
Only $8 billion in loans transferred to special servicing, compared to $12 billion in the previous quarter.
Meanwhile, the volume of loans transferring into special servicing hit $4 billion.
"Tempering the optimism, however, is the increased amount of time a CMBS loan is staying in special servicing. The average number of months in special servicing for unsold real estate-owned (REO) loans is 31.4 months and 29.2 months for REO. ‘Loans that spend more time in special servicing often have the highest loss severity," noted Stephanie Petosa, managing director for Fitch.