The delinquency rate for U.S. commercial mortgage-backed securities (CMBS) has reached its lowest level in a year, according to new data from Trepp LLC.
Trepp reports that the CMBS delinquency rate fell 15 basis points (bps) to 9.42% in February. Overall, the delinquency rate has fallen 92 bps since hitting a peak of 10.34% at the end of July 2012.
There were $2.7 billion in newly delinquent loans in February, which put about 48 bps of upward pressure on the delinquency rate. This was slightly lower than January's $2.8 billion in new delinquencies and is the third consecutive month this number has declined.
Trepp adds that loan resolutions dropped more noticeably, from $1.2 billion in January to just under a billion dollars in February. The removal of these loans from the delinquent category accounted for 18 bps of downward pressure on the delinquency rate. Loans that cured put an additional 40 bps of downward pressure on the rate.
Among the five major property types, hotel loans led the pack with an improvement of 169 bps between January and February. The big drop in the hotel delinquency rate moved the property type from the second worst performer to the second best, leapfrogging both the office and industrial loan readings over the course of the month. The rate on apartment loans also improved, while the rates on industrial and office loans were modestly higher.
‘In recent months we have noted that forward-looking data points to lower delinquency rates over the near term as special servicers continue to resolve nonperforming loans and as new CMBS deals are added to the index,’ says Trepp. ‘We expect that trend to continue in the near future. One ongoing offset to some of the downward pressure on the overall delinquency rate is the robust refinancing activity. With borrowing rates and CMBS spreads near record lows, refinancing activity will not only impact distressed loans, it will also lead to the removal of some performing loans from the equation.’
