Sector developments and company hires

Hotels dominate special servicing transfers
During 1H20, 1,065 US CMBS loans totalling US$40.1bn (representing approximately 7% of total outstanding CMBS) transferred to special servicing, as CMBS borrowers continued to grapple with the economic impact of the coronavirus pandemic, according to Fitch. The vast majority of these transfers, more than 900 loans totalling US$35.5bn, occurred during 2Q20. In comparison, special servicers had only 674 CMBS loans totalling US$9.1bn in their care at year-end 2019.

Of the 1,065 loans transferred to special servicing so far during 2020, 62% by loan count and 53% by balance are currently 30 days or more delinquent. As a result, outstanding advances for CMBS loans among the four largest master servicers - Wells Fargo, Midland Loan Services, KeyBank and Berkadia Commercial Mortgage - grew to US$1.5bn, as of July.

Common forms of debt relief granted to CMBS borrowers so far are reallocation of reserves to pay debt service, interest-only periods, principal and interest or reserve payment forbearance, and changes to waterfall structures for cash-managed loans. Fitch also expects an increase in extensions for maturing loans, given limited refinancing options for retail and hospitality assets. During the first six months of 2020, 50 non-performing matured loans totalling US$4.1bn transferred to special servicing.

Of the loans transferred to special servicing during 1H20, 54% by count are secured by hotel properties and 32% by retail. By loan count, the New York, Houston, Chicago, Los Angeles and Dallas metro areas have seen the largest number of loan transfers.

MERS eRegistry integration underway
MERSCORP Holdings has partnered with the Federal Home Loan Bank (FHLBank) system to facilitate use of the MERS eRegistry by FHLBank member financial institutions wishing to pledge eNotes as collateral. The 11 FHLBanks, which serve nearly 6,900 member financial institutions across the country, announced in February they are developing a solution that will pave the way for their members to pledge eNotes as eligible collateral (SCI 15 November 2019).

To become eligible to submit eNotes, FHLBank member financial institutions will need to work simultaneously with their respective FHLBank and MERS to execute the necessary legal and operational requirements, implement a compliant eVault and integrate with the MERS eRegistry. Several FHLBanks expect integration to be complete in 3Q20, while the remainder expect to be fully integrated in 4Q20 and continuing into 2021.

North America
Kevin Duignan has been appointed global analytical head of Fitch. He will also continue in his role as global group head for financial institutions, which he has held since 2017, until a successor is appointed. As global analytical head, Duignan will oversee the analytical teams that produce credit ratings and related research on over 20,000 entities around the world for all the sectors covered by Fitch. He is based in New York and will report to Ian Linnell, president of Fitch.