Fitch Ratings: Coronavirus Sparks Largest-Ever CMBS Delinquencies Rate Jump
June saw the largest month-over-month increase in the commercial mortgage-backed securities delinquency rate in more than 15 years, reported Fitch Ratings, New York.
Loan delinquencies surged 213 basis points during June to 3.59 percent, Fitch said. New delinquencies equaled $10.8 billion, significantly exceeding the month’s resolution volume of only $172 million.
“The current trajectory is tracking Fitch’s expectation that the impact from the coronavirus pandemic will drive the delinquency rate higher over the next few months,” Fitch said. It forecast the CMBS delinquency rate could peak between 8.25 percent and 8.75 percent by the end of this quarter. “Fitch has also seen a greater rate of 30-day loan delinquencies rolling to 60 days, a trend likely to continue and expects the volume in special servicing will further spike over the summer.”
Trepp LLC, New York, agreed delinquency figures could climb in July because more than 4 percent of loans by balance missed their June payment but remained less than 30 days delinquent. That percentage of loans in or beyond their grace period dropped from 7.6 percent in May.
“So perhaps we have reached terminal delinquency velocity–meaning most of the borrowers that felt the need for debt service relief have requested it,” Trepp’s June Delinquency Report said. “Put another way, if a borrower didn’t need relief in April, May or June, there is a good chance the borrower won’t be needing it–although maturity defaults could still be an issue. If that is the case, the expectation would be that the increases in the delinquency rate going forward should be smaller than what we saw in May and June.”
Fitch said all property types reported “substantially” higher delinquency rates in June compared to May. The largest jumps were in the hotel sector, which jumped from a 2.00 percent delinquency rate in May to 11.49 percent in June, and the retail sector, which increased from 3.82 percent to 7.86 percent in June.
Loans reported as 30 days delinquent increased to $15.7 billion in June from $14.6 billion in May, Fitch said. The average loan size of the 30-day loan delinquencies grew to $25 million from $13 million in May.
