Sign in Subscribe
Financial services

Conduit CMBS Default and Loss Study Reveals Key Trends and Insights

Strategic Insights

— 2 min read

The latest report by Kroll Bond Rating Agency, LLC examines the conduit CMBS loan defaults and losses over a 29-year study period, focusing on the property, loan, and financial characteristics contributing to defaults. In an addendum, the study compares default and loss metrics for five-year loans to traditional 10-year loans, driven by borrower hesitancy to lock in longer-term financing.

Key Takeaways:

  • The study population comprises 108,096 conduit CMBS loans originated between 1995 and Q1 2024, with an aggregate securitized balance exceeding $1.4 trillion.
  • The cumulative default rate for the study population is 16.9%, representing 18,315 defaulted loans.
  • The term default rate was 11.8%, while loans that reached maturity experienced a default rate of 6.8%.
  • The cumulative loss rate as of Q1 2025 was lower at 4.4%, compared to 4.6% in the prior report.
  • Forbearance has become the dominant workout strategy since the pandemic, accounting for 98.4% of modifications after 2020.
  • Lodging showed the highest cumulative default rate (31.8%), followed by health care (26.1%) and office (22.8%).
  • Office experienced the highest loss severity at 51.4% (2% loss) and 33.5% (for all defaulted loans).
  • Tier 1A markets experienced the lowest cumulative default rate at 11% and a loss severity rate of 47.4%.
  • Nonperforming matured loans had a much higher loss severity and recovery time (43.4%, 17.3 months) than performing matured loans (25.1%, 4.9 months).
  • Five-year loans exhibited a higher cumulative default rate of 24.2% compared to 16.8% for 10-year loans, but recorded a lower overall loss severity of 22.3% on resolved loans.

Statistics:

  • 18,315 defaulted loans, representing a cumulative default rate of 16.9% (as of Q1 2025)
  • 11.8% term default rate
  • 6.8% default rate for loans that reached maturity
  • 4.4% cumulative loss rate (as of Q1 2025)
  • 73 loans defaulted through Q1 2025 (including 773 additional loans)
  • 108,096 total loans in the study population (up 3,849 loans)
  • 22,819 loans were securitized in 2024 alone
  • $1.4 trillion aggregate securitized balance
  • 2008 vintage had the highest default rate (32.7%) and the highest cumulative loss rate (16.3%)
  • 2005-08 vintages represent 46.8% of total defaults
  • 23.8 months average time taken to resolve defaulted loans
  • 49.7% average loss severity for resolved loans experiencing losses of 2%
  • 28.9% average loss severity of all 16,723 resolved loans
  • 98.4% of modifications after 2020 were forbearances

Sources:

  • Kroll Bond Rating Agency, LLC
  • KBRA release, "Conduit CMBS Default and Loss Study" (no date provided)
  • KBRA report, "Conduit CMBS Default and Loss Study" (no date provided)

Read more