The number of resolutions of troubled loans in commercial mortgage-backed securities deals is rising but this doesn’t necessarily mean an improvement in performance. According to Bill O’Connor, partner at Thompson and Knight. “They’re acting like CMBS is healthy when it’s really not,” he said, noting that it also creates a perception that underwriting is also better.

According to data from Fitch Ratings, about 9% of all CMBS loans are in special servicing. There were 974 loans resolved, totaling roughly $17 billion, in the first half of this year. In 2012, there were 2,845 loans resolved and in 2011 there were 3,151.

O’Connor puts it like this: when a large loan is resolved, the....

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