Friday, March 16, 2012

The CMBS maturity wall is here

The latest report from Fitch discusses the timing of pain taken across the structured products universe. The charts below show the number of impairments and the impairment rate for each year. Here are the three major categories of structured products.

1. RMBS: The pain in Residential Mortgage Backed Securities was taken relatively early, and it was swift and brutal. The impairment rate shot above 40% in 08 and 09.
RMBS (source: Fitch)

2. Structured Credit: CDOs and CLOs took a bit longer to play out. But impairment in CDOs in particular clearly played out.
Structured Credit (source: Fitch) 

3. Which brings us to CMBS. Back in 2009 we discussed the looming CMBS maturity wall. Well that wall is here now, and unlike the previous two categories, we still have some ways to go on CMBS to get over the impairment peak.
CMBS (source: Fitch) 

Commercial property markets have stabilized a bit, back to 2003 levels (as the chart below shows), allowing some sales and refinancing. But this maturity wall will take some time to work out, while it continues to put downward pressure on various commercial property markets in the US.

Moodys/REAL Commercial Property Price Index (CPPI) - Methodology developed at MIT's Center for Real Estate (Source: MIT)

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