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CMBS Delinquencies Rise Again, But Pace of Growth Slows

CMBS Delinquencies Rise Again, But Pace of Growth Slows

CMBS delinquencies continued to grow in recent months, according to reports from Trepp LLC and Realpoint LLC, two research firms tracking the sector. However, the pace at which delinquencies are rising has begun to abate.

In May, the delinquent unpaid balance for CMBS rose $2.9 billion, up to $57.34 billion from 54.65 a month prior, according to Horsham, Pa.-based Realpoint.

Overall, the delinquent unpaid balance is up 205 percent from a year ago and is now more than 26 times the low point of $2.21 billion in March 2007. The distressed 90+-day, foreclosure and REO categories grew in aggregate for the 29th straight month—up by $1.99 billion from the previous month. The total unpaid balance for CMBS pools reviewed by Realpoint for the May remittance was $788.7 billion down from $790.93 billion in April.

The delinquency ratio for May of 7.27 percent (up from the 6.91 percent reported for April) is more than three times the 2.28 percent reported in May 2009 and 25 times the Realpoint recorded low point of 0.28 percent in June 2007.

Realpoint maintained its projection for the delinquent unpaid CMBS balance, which it expects to reach between $80 billion and $90 billion by the end of 2010. The firm also projects the delinquency percentage to grow to 11 percent to 12 percent under more heavily stressed scenarios through the end of the year.

By property type, in May, retail loans topped multifamily loans as the greatest contributor to overall CMBS delinquency for the sixth straight month, at 1.8 percent of the CMBS universe and 24.4 percent of total delinquency. The retail default rate increased to 6.5 percent, up substantially from 2.6 percent one year ago. Realpoint expects retail delinquencies to continue to increase throughout 2010.

Meanwhile, in its monthly report, Trepp said that the CMBS delinquency rate had reached a record 8.59 percent in June, up from 8.42 percent in May. The 17 basis point increase was the smallest Trepp has recorded since July 2009. The delinquency rate one year ago was 4.07 percent. Prior to the current report, delinquencies for the last eight months rose between 37 and 49 basis points per month. The lone exception was this past February where the rate jumped by just 23 basis points.

The increase for seriously impaired loans was significantly higher than the headline number. The percentage of loans seriously delinquent (60 days +, in foreclosure, REO, or non-performing balloons) jumped 28 basis points—although that was a marked improvement over May's 41 basis point increase.

By property type, the lodging and multifamily sectors have the highest delinquency rates followed by retail, office and industrial. The lodging delinquency rate is nearly three times as great as that for the retail sector.

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