By Al Barbarino
The U.S. CMBS delinquency rate declined for the first time since February, the latest report from Trepp shows.
After five consecutive months of increases, including three months that set all-time records, the rate fell 21 basis points, from 10.34 in July to 10.13 percent – the largest one-month drop since November 2011.
“Over the last few months, we predicted that the Trepp CMBS Delinquency Rate would hit a high point in the early to mid-Summer and then decelerate in the second half of the year,” a report from Trepp stated. “That prognostication came to fruition this month when the delinquency rate fell sharply.”
The improvement was primarily driven by $1.5 billion in loans that were resolved with losses in August with losses, accounting for about 26 basis points of downward pressure on the rate; and the absence of upward pressure on the rate now that most of the 2007 securitized loans have passed their maturity dates.
“For the immediate future, the worst of the delinquencies should be behind us,” said Manus Clancy, senior managing director at Trepp.
Newly delinquent loans (roughly $3.3 billion in total) created upward pressure of about 57 basis points, in improvement from the 81 point ($4.6 billion) upward pressure in July. Loans that cured (about $2.8 billion) put downward pressure of 48 basis points on the rate in August.
Apartment, lodging and office segments improved, but industrial and retail loan rates increased.
“One category to keep an eye on is loans that are past their balloon date but are current in their interest rate,” also known as “performing balloons,” which account for 1.13 percent of loans in the database and would have spiked August’s delinquency rate to 11.26 percent had they been factored into the data, the report states.
Excluding performing balloons, there are currently $57.8 billion delinquent loans.