Tuesday, September 8, 2009

CMBS Default Rates by Vintage

Will the 2008 vintage be a good one for CMBS? It's too early to say, but it doesn't look good. The chart below shows cumulative default rates, in percent of notionals, for the 2004-2008 vintages, as a function of quarters passed since the end of each of these years.


(Source: Blomberg, dataforthoughts. Click to enlarge.)

We can see that it took 14 quarters for both the 2004 and 2005 vintages, on average, to reach a 6% default rate. The 2006 vintage reached 4% after just 10 quarters, but is not markedly worse than its predecessors. The 2008 vintage, however, already reached 1% after just 3 quarters, which is ominous.
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2 comments:

  1. Charles CecilSeptember 8, 2009 at 8:20 PM

    well, at this point, the buyer of CMBS certainly wants to thoroughly re-underwrite any CMBS including the properties in its pool before buying bonds, and, having done so, eschewing a reliance on rating agencies and a statistical modeling approach, should be ambivelent as to vintage.

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  2. JFCSeptember 8, 2009 at 9:15 PM

    Good point, Charles, thanks.
    Please feel free to introduce your company -- looks very interesting to anyone investing in or working on CRE and CMBS.

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