CMBS Losses Deepen

The loss rate in some property sectors could exceed 40%, says Trepp. Properties backed by CMBS loans that have undergone an appraisal reduction may be a financial fortune cookie for investors. Ordering an updated appraisal is just one of the steps required after a loan has been transferred to special servicing. 

In the current environment, most appraisals have been reduced from their original value at securitization, especially loans underwritten during the boom for commercial mortgage-backed securities. “Appraisal reduction is a forward-looking measure of potential future losses,” explains Paul Mancuso, a vice president with commercial real estate data and analytics firm Trepp LLC.

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