Statistical Indicators

Moody's: CMBS Loan Delinquencies Soar 79% in 2010

Posted on Wednesday, January 19, 2011

The delinquency rate on loans included in conduit and fusion U.S. commercial mortgage-backed securities (CMBS) deals skyrocketed 79 percent over the past 12 months, according to Moody’s Investors Service.
Delinquencies started 2010 at 4.90 percent. By the end of December, the rate of past-due loans had hit 8.79 percent, based on the New York rating agency’s analysis.
Moody’s says that the rate of increase in delinquencies slowed considerably in the second half of 2010. The firm’s analysts believe commercial real estate markets are beginning to show signs of a turnaround.
They are expecting the delinquency rate in the conduit/fusion CMBS space to continue rising in 2011, but at a slower pace than it has over the past two years. They project a delinquency rate in the range of 9.5 percent to 11 percent by the end of 2011.
“The rate of increase in newly delinquent loans is likely to continue moderating in the coming year as capital markets continue to heal and the flow of loans into special servicing slows,” said Nick Levidy, Moody’s managing director.
Looking back on December, loans totaling $3.7 billion became newly delinquent, while previously delinquent loans totaling approximately $2.6 billion became current, worked out, or disposed.
In all, the total number of delinquent loans increased in December to 4,104, and the total balance of delinquent loans increased by approximately $1.1 billion to $54.9 billion.
By property type, hotels saw the most improvement in their delinquency rate in December with a five basis point drop to 16.37 percent as $373 million in hotel property loans became delinquent while $452 million became current, worked out, or disposed.
The delinquency rate for offices also improved in December, although only by a single basis point to 6.71 percent as loans totaling $808 were newly delinquent and loans totaling $850 million were resolved.
Retail saw $1.15 billion in loans becoming newly delinquent, while only $474 million in loans dropped out of delinquency, raising the retail loan delinquency rate 30 basis points to 7.44 percent.
Multifamily saw a steeper 48 basis point rise to 14.38 percent during December, with a $371 net rise in its total delinquent balance.
Industrial properties continue to have the lowest delinquency rate at 6.54 percent, a 16 basis point increase from November.
All four US regions showed modest increases in delinquency rates in December, all rising within a narrow 10-17 basis point band. The South has the highest delinquency rate at 11.00%, followed by the West, at 9.86%, and the Midwest, at 8.74%. The East is the best performing region, with a delinquency rate of 6.70%.
For the year 2010, the Midwest had the smallest increase in its delinquency rate, which rose 312 basis points, while the West experienced the largest increase, with a 458 basis point rise.
By state, Nevada saw another steep rise in delinquencies in December, as its rate climbed 149 basis points to 28.99 percent. Alabama is the next worst performing state, but with a delinquency rate that is 1000 basis points lower than Nevada.
By: Carrie Bay, DS News


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