The Evolution of Defaults and Losses in CMBS

This report provides an in-depth analysis of CMBS loss performance, contrasting legacy 1.0 conduit trends with current 2.0 data. It introduces a property-type risk framework to assess implied loss expectations.

Key Takeaways

• 1.The current CRE downturn is driven by sector-specific distress rather than a broad-based collapse.
• 2.Cumulative losses in the conduit universe stand at ~5.1%, with legacy 1.0 conduit deals reporting significantly higher losses (8.3%) compared to 2.0 (1.3%).
• 3.Office remains the largest contributor to embedded loss exposure, while 5-year loans face refinancing challenges and 10-year loans face more physical impairment risk.

Table of Contents

• Key Takeaways
• Executive Summary
• Evolution of CMBS Delinquency and Underwriting
• Conduit Loss and Liquidation Trends
• Defining Our Property Subtype Risk Framework
• Months to Recover
• Loss Severity by Various Loan Characteristics
• Modification Type
• Maturity vs Term Defaults
• 5 Year vs 10 Year Conduit Performance
• Conduit Expected Loss Curves

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