KBRA releases a new conduit CMBS default and loss study that updates our previous observations on the credit behavior of conduit loans.

This KBRA report provides insights into the property, loan, and financial characteristics that contributed to conduit loan defaults and losses over the 29-year study period. Given the current popularity of five-year conduit loans—driven by borrower hesitancy to lock in longer-term financing—we have added an addendum that compares default and loss metrics for five-year loans to traditional 10-year loans.

Since our previous report—based on performance data between 1995 and Q2 2021—an additional 773 loans defaulted through Q1 2025, taking the cumulative default count to 18,315 from 17,542, a 4.4% increase. Over the same period, the total loan count increased to 108,096 from 104,247, reflecting a 3.7% increase.

Key Takeaways

• The study population, which comprises conduit CMBS loans generally originated for securitization between 1995 and Q1 2024, increased to 108,096 loans (up 3,849 loans), with an aggregate securitized balance in excess of $1.4 trillion.
• Based on performance data from 1995 through Q1 2025 (the study period), the cumulative default rate for the study population is 16.9%, representing 18,315 defaulted loans. This reflects a slight increase from the 16.8% default rate (17,542 defaults) reported in our previous study, which examined performance data through 1H 2021 for loans originated and securitized through 1H 2020.
• 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.
• The average loss severity for resolved loans experiencing losses of >2% (10,591 loans) was 49.7% (49.9% in the prior report), while the average loss severity of all 16,723 resolved loans was 28.9% (30.2% in the prior report).
• The time taken to resolve defaulted loans averaged 23.8 months, up from 23.2 months in the prior study.
• The 2005-08 vintages, which represent 46.8% of the total defaults, had a significant effect on the cumulative default rate. The 2008 vintage had the highest default rate (32.7%) and the highest cumulative loss rate (16.3%).
• Forbearance has become the dominant workout strategy since the pandemic. Before 2020, forbearances represented 6.6% of the 273 modifications. In contrast, they accounted for 98.4% of the 740 modifications after 2020.
• Through Q1 2025, lodging showed the highest cumulative default rate (31.8%), followed by health care (26.1%) and office (22.8%). Retail posted a cumulative default rate (17%) similar to the overall average (16.9%), while the remaining property types recorded below-average default rates.
• Among the major property types, 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% (Tier 1B was slightly lower at 45.5%).
• 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).
• Securitization loan-to-value (LTV) and debt yield (DY) have shown notable improvements since the global financial crisis (GFC), with LTVs reducing to 51.1% in 2024 from 69.1% in 2007, and DY increasing to 17.3% from 9.6%. Lower LTVs and higher DYs are historically associated with lower default rates and loss severities.
• Five-year loans exhibited a higher cumulative default rate of 24.2% compared to 16.8% for 10-year loans.
• Despite higher defaults, five-year loans recorded a lower overall loss severity of 22.3% on resolved loans, versus 30.1% for 10-year loans.

Click here to view the report.

Related Publications

• Conduit CMBS Default and Loss Study: Default Volatility, Loss Stability
• Conduit CMBS Default and Loss Study: Spotlight on Five-Year Loans
• Freddie Mac K-Series: Loan Default and Loss Study
• CRE CLO Loan Default and Loss Study
• CMBS: CMBS Single-Borrower Default and Loss Study Update
• Canadian CMBS Loan Default and Loss Study

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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