CMBS 2.0 Borrowers Refi Early
Early refinancing is a trend in CMBS 2.0, says Fitch Ratings, which expects the trend to continue as interest rates remain low and property fundamentals improve. Accordingly, borrowers increasingly have turned to defeasance and prepayments on the post-2008 generation of securitized loans.
By securitized balance, $9.3 billion in CMBS 2.0 loans have refinanced since they were issued, consisting of $7.2 billion in prepayments, $2.0 billion in defeasance and $42 million in payoffs at maturity. This represents 5% of the original $192 billion in the Fitch-rated CMBS 2.0 universe, excluding non-performing loan pools and restructured or Re REMIC deals.
Overall, says Fitch, loan performance continues to improve or remain stable. As a result, the costs of defeasance or prepayment are often offset by value growth.