CMBS Delinquencies Unchanged in March as Loan Liquidations Remain Low

Trepp, LLC, the leading provider of information, analytics, and technology to the CMBS, commercial real estate, and banking markets, released its March 2015 US CMBS Delinquency Report today.

The Trepp CMBS Delinquency Rate was unchanged in March, interrupting the recent string of falling delinquencies. After falling for four consecutive months, the delinquency rate for US commercial real estate loans in CMBS remains 5.58%. The percentage of seriously delinquent loans, defined as those 60+ days delinquent, in foreclosure, REO, or non-performing balloons, fell one basis point to 5.41%.

Almost $1.1 billion in CMBS loans became newly delinquent in March, bringing total delinquencies to $29.4 billion, slightly below the total as of month-end February. Over $800 million loans were cured last month, while $570 million loans that were previously delinquent paid off either at par or with a loss.

The decline in the pace of loan resolutions does not come as a surprise. After a torrid pace in 2012 and 2013, liquidations have slowed for the time being. As the market gets further into the cycle of 2006 and 2007 10-year loans reaching their maturities, Trepp expects liquidation volume numbers to start to pick up again.

"The financial markets were turbulent in March, but the CMBS market remained a sea of tranquility," said Manus Clancy, Senior Managing Director at Trepp. "While market watchers were worried about lower US GDP, an overly strong dollar, and sagging corporate earnings, the CMBS market was as steady as could be. Spreads remained largely unchanged in March, new issuance was solid, CMBS volatility was light, and the delinquency rate was flat. That performance compared to the big whipsaws in US stock prices seemingly each day in March."

Fitch: U.S. CMBS New Issue Metrics Worsen; Legacy Metrics Improve

The road continues to diverge between new issue and legacy metrics for U.S. CMBS, according to Fitch Ratings in its latest quarterly index report.

New issue metrics continue to decline as the percentage of new issue full and partial interest-only (IO) loans in Fitch-rated transactions rose by five percentage points last quarter. The increase was driven by an approximately four-percentage-point increase in full IO loans. In addition, Fitch-stressed LTVs continued to edge up, while stressed DSCRs were lower.

Meanwhile, metrics of legacy U.S. CMBS improved. Delinquencies in Fitch-rated transactions fell in fourth quarter-2014 (4Q'14), though the rate of declines slowed. This was largely due to a backlog of REO assets, which comprised nearly two-thirds of the index balance. Furthermore, the percentage of loans in special servicing declined again in 4Q'14 to $25.1 billion.

'The wave of upcoming CMBS maturities will begin in 2015, particularly in the second half of the year,' said Managing Director Mary MacNeill. The majority of 2015 loan maturities for Fitch-rated, fixed-rate multiborrower CMBS ($21 billion) are set to come due in 2H'15. Roughly $12 billion comes due in 1H'15 ($3.5 billion in 1Q'15). The majority of the higher-leveraged, peak-vintage loans mature between 2016 and 2017, which totaled $129 billion at YE14, excluding $11 billion that already defaulted and remain outstanding.

Fitch: Sizeable REO Dispositions Drive U.S. CMBS Delinquencies Lower

Summary:  CMBS delinquencies fell in Industrial, Hotel, Office, Multifamily, and Retail sectors according to Fitch, driven by large REO dispositions.

NEW YORK--(BUSINESS WIRE)--

The U.S. CMBS delinquency rate continued its steady improvement last month driven by large REO dispositions, according to the latest index results from Fitch Ratings.

CMBS late-pays fell 11 basis points (bps) in September to 6.57% from 6.68% a month earlier. The drop was led by the sale of the Granite Run Mall, while the sale of another large troubled asset appears imminent. The Granite Run Mall was previously the fourth largest loan in COMM 2006-C7 and represented 5.5% of the deal. Meanwhile, Fitch awaits the sale of another troubled mall: Gwinnett Place in Duluth, GA. The asset represents the fifth largest in MLMT 2007-C1, comprising roughly 4% of the deal.

CMBS delinquencies will continue to move lower as assets become REO and are disposed of. In fact, the percentage of REO assets in Fitch's delinquency index exceeded 50% for the first time in the index's history last month. This compares to 37% one year ago.

Current and previous delinquency rates are as follows:

--Industrial: 9.57% (from 9.41% in August);

--Hotel: 7.52% (from 7.68%);

--Office: 7.41% (from 7.56%);

--Multifamily: 6.95% (from 7.30%);

--Retail: 6.11% (from 6.23%).