Posted on Wednesday, December 8, 2010
The recent optimism surrounding delinquencies on commercial real estate loans bundled into investment bonds has been hit with a blast of cold water. The rate of past due loans suddenly jumped in November after seeing a big decline the month before.
According to data from the New York-based research and analytics firm Trepp LLC, the percentage of loans held in U.S. commercial mortgage-backed securities (CMBS) that were 30 or more days delinquent, in foreclosure, or REO rose 35 basis points in November to 8.93 percent, putting the value of delinquent loans at $60.3 billion.
Trepp says November’s climb is the largest monthly increase since May 2010. The overall rate is the second highest reading ever recorded by the company, second only to this September’s measurement of 9.05 percent.
The steep upsurge follows a 47 basis point decline in the rate of CMBS loans 30-plus-days delinquent, in foreclosure, or REO reported by Trepp for the month of October, when
the company put the CMBS delinquency rate at 8.58 percent with a value of $58.3 billion. Trepp says October’s decline, which reflected the resolution of a $4.1 billion mortgage on Extended Stay Hotels, was the first time CMBS delinquencies have dropped in over a year.
Manus Clancy, managing director for Trepp, noted that enthusiasm had been building over the past six months among market participants that the peak for CMBS delinquencies was nearing.
“This jump in delinquencies comes despite the fact that new issues are starting to make their way into the calculation and the special servicers are becoming more adept at processing the troubled loans,” Clancy said. “While we expect both of these factors will continue to put downward pressure on the rate, it would not surprise us if the rate continued to bounce around a bit as it continues to rise over the next several months.”
Trepp’s latest report shows that mortgages for multifamily residences passed hotels for the dubious distinction of the worst-performing property type during the month of November.
The delinquency rate for multifamily CMBS loans came in at 15.80 percent last month in Trepp’s study. That compares to 14.56 percent for hotels, 7.59 percent for retail stores, 6.95 percent for office spaces, and 6.64 percent for industrial properties.
The overall delinquency rate for seriously impaired loans has also increased. Trepp says the percentage of loans seriously delinquent – meaning 60-plus days delinquent, in foreclosure, REO, or non-performing balloons – is now 8.13 percent, an increase of 17 basis points in one month.
DS news Carrie Bay