Fitch: CMBS Delinquencies To Peak In 2012

Rising defaults among all property types led to a 42 basis point (bp) increase in U.S. commercial mortgage-backed security (CMBS) delinquencies to close out 2009 at 4.71%, according to the latest Loan Delinquency Index results from Fitch Ratings.

‘Though delinquencies have increased approximately five times from a year ago, they may not peak until 2012,’ says Managing Director Mary MacNeill. ‘An increased amount of loans are coming due over the next two years that will result in delinquencies possibly peaking at 12 percent.’

Fitch's surveillance criteria reflect a forward-looking view of performance. Therefore, the current ratings on CMBS transactions recently reviewed by Fitch incorporate significantly higher delinquency rates.

Each of the five main property types has seen an increase in delinquencies of over 195% since December 2008. The rates range from multifamily's 196% increase to the hotel sector's 1,175% increase.

Delinquency rates for these properties are as follows (along with total dollars delinquent in December 2009 versus total dollars delinquent as of December 2008):

  • office – 2.66% ($3.9 billion vs. $603.5 million);
  • hotel – 9.13% ($4.6 billion vs. $363.7 million);
  • retail – 4.25% ($5.7 billion vs. $1.2 billion);
  • multifamily – 7.54% ($5 billion vs. $1.6 billion); and
  • industrial – 3.57% ($851.3 million vs. $186.2 million).

There are currently 25 delinquent loans greater than $100 million, compared to four in December 2008, Fitch says. An increased number of loans with larger balances were securitized in 2006 and 2007, when underwriting was most aggressive. Fitch expects that, given the restricted lending environment, delinquencies and maturity defaults of these loans to be a significant contributor to the future index.

Due to the increased volume alongside weaker underwriting parameters for later vintages, defaults increased significantly from the end of 2008. The four most recent vintages have gone from representing just over half of delinquencies by balance to over 75% of the total at the end of December.

The vintages carry the following delinquency rates (along with total dollars delinquent versus total dollars delinquent as of December 2008):

  • 2005 – 3.16% ($2.4 billion vs. $420.1 million)
  • 2006 – 5.11% ($5.6 billion vs. $1.1 billion);
  • 2007 – 5.22% ($8.1 billion vs. $631.9 million); and
  • 2008 – 7.33% ($312.8 million vs. $236.5 million).

Fitch's delinquency index includes 2,143 loans totaling $21.6 billion of the Fitch-rated universe of approximately 42,000 loans comprising $457.5 billion that are at least 60 days delinquent or in foreclosure. The index excludes Fitch-rated loans that are 30 to 59 days delinquent, which currently total $7.2 billion – a decrease from $7.5 billion one month prior (Extended Stay America was re-classified as 60 days delinquent after being only 30 days delinquent in November).

SOURCE: Fitch Ratings


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