Morningstar: CMBS Delinquency Rate Up Again

The commercial mortgage-backed securities delinquency rate rose for the third consecutive month in February, edging up three basis points to 3.04 percent, reported Morningstar Credit Ratings, New York.

The delinquency rate is 28 basis points higher than a year ago, Morningstar’s CMBS Surveillance Delinquency Report said.

While February marked the eighth straight month the delinquency rate hovered near 3 percent, Morningstar said it expects the rate to rise later this year due to a jump in the volume of newly delinquent loans, many of which will default at or near maturity. 

“With many of the maturing loans overleveraged and lenders being more conservative, we expect the maturity payoff rate to fall, because loans issued in 2007 were often originated under more aggressive terms than those in 2006,” Morningstar said. It predicted only 55 to 60 percent of the non-defeased loans coming due this year will be able to refinance, down from a 72.5 percent year-to-date payoff rate.

Looking at expected payoffs, Trepp, New York, said $6.7 billion of maturing debt came due in March. “[And] March’s total is the lowest of the next six months, as the amount of CMBS maturing by month only augments once April begins, Trepp’s Wall Of Maturities report said. “What’s left to refinance are loans issued towards the end of the 2006/2007 commercial real estate bubble and whether or not the properties behind those loans meet today’s credit standards is unclear.”

More than 9 percent of that $6.7 billion in CMBS debt scheduled to mature in March has fallen into default–at least 60 days delinquent, in foreclosure, REO or non-performing balloons–and 14.2 percent has been transferred to special servicing, Trepp reported.

Trepp said more than $61 billion in CMBS debt will come due nationwide between now and August. Nearly 6 percent of that total is past due on payment and more than 10 percent is in special servicing. Office and retail loans comprise 28.9 percent and 26.5 percent of the volume maturing during this time frame, respectively.

The New York City area remains the metropolitan region with the largest amount of CMBS maturing in the next six months, Trepp reported, with $12.6 billion behind area properties coming due by late summer. “Including loans that have recently fallen past maturity, there has been a considerable increase in the percentage of loans that are seriously delinquent or have been transferred to special servicing among the New York City and Washington, D.C. metropolitan  statistical areas,” Trepp said.

Despite rising delinquencies, CMBS loan prices increased in February, reported DebtX, Boston. The estimated price of whole loans securing the CMBS universe rose to 98.2 percent from 97.1 percent at the end of January, DebtX Managing Director Will Mercer said.

“The February rise in CMBS loan prices was due to a decrease in base market spreads and a decline in Treasuries,” Mercer said.