CMBS Delinquency Rate Falls; Issuance Bounces Back

The commercial mortgage-backed securities delinquency rate continued to fall in October while issuance increased, said Trepp LLC and KBRA, New York.

“After two huge jumps in May and June, the [CMBS delinquency] rate has now declined for four consecutive months,” said Trepp Senior Managing Director Manus Clancy.

Clancy noted October’s CMBS delinquency rate equaled 8.28 percent, down 64 basis points from September. “The declines come with the same caveats we’ve noted before,” he said. “Some of the loans being identified as ‘current’ have come as a result of forbearances being granted and borrowers being authorized to use reserves to bring debt service payments up to date.”

Trepp estimated $30-plus billion in loans in the private market have been granted forbearances.

“The biggest decline in the delinquency rate came from hotel loans,” Clancy said, likely due to the high number of forbearances granted to that part of the market.

S&P Global Ratings, New York, reported 7.27 percent of all loans are in forbearance or have made a forbearance request that is currently in process.

“Though the overall [CMBS] delinquency rate is down, the share of delinquent loans that are delinquent 60-plus days–that is, seriously delinquent–is 85 percent as grace period levels sharply receded over the last couple of months,” S&P said in its October SF Credit Brief. “Even though a percentage of 30-day delinquent loans were resolved and made current in the prior month, a growing share have transitioned to becoming seriously delinquent.”

Furthermore, 120-plus-day delinquent loans continue to increase sharply to more than $17 billion, S&P noted. This segment now accounts for nearly 40 percent of all delinquent loans.

Turning to new issuance, CMBS private-label pricing volume ended October at $6.1 billion, “a positive note in an otherwise somber year for new issuance,” KBRA said. Though October’s figure represented a 78 percent increase from September, year-to-date issuance stands at just over $45 billion, 35-plus percent lower than this time a year ago.

KBRA said up to 11 deals could launch in November including two or three conduits, three or four single-borrower transactions and four Freddie Mac K-Series deals.