NEW YORK CITY-Loss severities on CMBS were already well abovethe historical average in the second quarter, Moody’s InvestorsService said in August. On Thursday, the ratings agency said lossesfor the third quarter were even higher, with the average historicalweighted loss severity rising to 38.4% from 35% in Q2.

An additional 498 CMBS loans were liquidated at a loss duringQ3, at an average loss severity of 52.6%, compared to 42.8% for the342 loans liquidated in the previous quarter. Moody’s says that thecumulative loss severity rate will continue to rise as more loansfrom the troubled 2006-2008 vintages are liquidated at relativelyhigher loss severities, while the near-term forecast calls for agreater percentage of CMBS loans that are in delinquent or inspecial servicing.

“Where we are in the real estate cycle can impact theprobability that a loan will default and its loss severity,” saysMoody’s VP Keith Banhazl in a release. “After commercial realestate markets bottom out and valuations begin to slope upwards,loan defaults should taper off and for those defaulted loans,smaller severities of loss can be anticipated.”