Kroll Bond Rating Agency (KBRA) released today its CMBS monthly newsletter, CMBS Trend Watch. As predicted a year ago in our 2014 Outlook, origination standards continued to deteriorate throughout 2014. Average KLTVs reached a new high to end the year above 101.0%, which was attributable to an increase in the number of high leverage loans with KLTVs in excess of 100%. At the same time, KBRA’s IO Index ended 2014 at 38.6%, 13.1 points above the prior year end, as the proportion of loans with partial interest-only periods hit post-crisis highs. Despite this, KDSC, which is calculated using the highest debt service during the loan term, increased 13 basis points (bps) higher year over year due to a marginal decline in coupon rates, which are likely to rise in the coming year but remain relatively low. We expect credit to remain under pressure as competition remains fierce among the field of 40+ originators in 2015.
In our commitment to transparency, we updated our comprehensive set of the statistics for our rated conduits along with this issue of Trend Watch. The spreadsheet is available at this link: KBRA Credit Metrics. The file includes a “Comp Calculator” feature that allows users to dynamically compare credit metrics across our rated conduit universe.
About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).
