Weekly Wrap: CMBS special-servicing rates fall again

February 4, 2021 9:00 PM

The specialty servicing rate of loans held in commercial mortgage-backed securities dropped for a fourth consecutive month in January.

The decline was attributed to lower rates of special-servicing assignments month-over-month across all CMBS property types, with the exception of hotels, according to a new report from Trepp.

The share of CMBS loans assigned to workout arrangements fell to 9.72%, down from 9.81% in December. The main factor was a significant rate drop for office property loans: about 2.52% of office loans are with special servicers, compared to 2.71% in December.

Since office properties account for the largest loan balances in outstanding CMBS portfolios, “the reduction in the office rate has a significant impact on the overall rate.”

January special servicing rates also fell month-over-month for industrial (1.06% from 1.22% in December), multifamily (2.75% from 2.9%) and retail (17.04% from 17.2%).

Hotels were the only property types with a worsening trend, increasing to a 24.49% servicing rate from December’s 24.07%. January’s rate is lower than November’s rate (25.56%) and close to the six-month average for lodging special servicing (24.3%).

The pre-COVID 19 special servicing rate for hotels a year ago was just 1.94%, among the lowest of the various CMBS loan types.

Hotel operators continue to struggle on loan repayments, having tapped out most reserve funds while struggling through a nearly year-long slump in convention business and tourism due to COVID-19 related travel restrictions.

Last week the American Hotel & Lodging Association reported corporate travel in 2020 was down 85% because of pandemic-related restrictions on large convention gatherings. Overall hotel revenue fell by half to $85 billion from a record $167 billion in 2019.

Fannie's green MBS program hits its stride

A securitization program Fannie Mae started last year to finance new energy-efficient homes has reached a critical mass.

Since the green single-family mortgage-backed securities program began last April, Fannie has securitized $111 million so far and established a regular schedule for issuance of the bonds, it announced last week.

That indicates that Fannie’s appetite for these mortgages has grown. The government-sponsored enterprise will be standardizing its loan purchases in this niche, said Arthur Johnson, vice president, capital markets at Fannie Mae.

“We’re looking to automate more so we can bring on more lender partners,” he said.

So far NVR Mortgage, DHIMortgage and Eagle Home Mortgage, all of which are lending arms of builders, have sold loans into the program.

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Bonnie Sinnock

Fed drops Santander enforcement action

The Federal Reserve has terminated a three-year-old enforcement action with Santander and Santander Consumer, resolving its last remaining regulatory matter.

The enforcement action, issued in March 2017, was the last of three written agreements the U.S. arm of Spain's Banco Santander had to settle with the Federal Reserve. In this case, the Fed ordered Santander U.S., the Boston-based holding company, to strengthen its oversight of the $64 billion-asset Santander Consumer, its Dallas-based auto lending unit.

In particular, the regulator said Santander Consumer needed to address deficiencies in its compliance risk management program and beef up board and senior management oversight of that function. The agency outlined its concerns in a 2015 written agreement, but issued the 2017 order because it said Santander had not made sufficient progress on those matters.

Santander has “made significant progress in strengthening board oversight, compliance, risk management, capital planning and liquidity risk management” since 2015, the company said Thursday.

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Laura Alix

Loan funds plunge back in

Last March, assets under management with leveraged-loan mutual and exchange-traded funds plunged 24% as managers dumped distressed assets at the onset of the coronavirus outbreak.

But after making $3.216 billion of net loan purchases in January, loan funds have grown to their highest post-pandemic AUM levels at $96.5 billion, according to data from Revinitiv.

That level is still below the $114.8 billion from February 2020 for loan funds, before the COVID-19-driven sell-off pushed levels down to $86.7 billion.

January's inflows were the highest monthly total since March 2017 ($4.208 billion) and – following December's inflow total of $397 million – provided the first consecutive months of positive flows into funds since 2018.

January's AUM is also down 19% year-over-year, and 45% low than September 2018's peak of $175.5 billion for loan funds, which compete for speculative-grade loan assets also coveted by asset managers of broadly syndicated collateralized loan obligation portfolios.

January was also busy for CLOs, with 17 new-issue portfolios priced totaling $8.5 billion, including four deals with a total size over $600 million.

CLO assets under management ended January at $747 billion, up 10.03% year-over-year, according to Refinitiv.

Weekly Wrap: CMBS special-servicing rates fall again

Fannie's green MBS program hits its stride

Fed drops Santander enforcement action

Loan funds plunge back in

'21 container ABS volume tops $1B