CMBS Delinquency Rate Continues Improvement

Michael Tucker mtucker@mba.org

August 30, 2018


The commercial mortgage-backed securities delinquency rate declined for the third consecutive month due to steady new issuance and few new delinquencies, reported Fitch Ratings, New York.

Loan delinquencies fell eight basis points in July to 2.64 percent, Fitch said. New issuance volume continued to outpace portfolio runoff.

Nearly all property types posted lower delinquency rates; only hotels saw a small increase, Fitch said. The retail sector's delinquency rate fell four basis points to 5.60 percent, the office sector's rate fell 11 basis points to 3.69 percent and industrial real estate saw a 22 basis point drop to 2.26 percent. The hotel sector delinquency rate rose seven points to 2.51 percent.

Multifamily remained the sector with the lowest delinquency rate, just 0.45 percent. But Fitch noted the student housing delinquency rate is now six times the overall multifamily delinquency rate as it increased 20 basis points to 2.70 percent in July. Loans secured by student housing properties account for only seven percent of the overall multifamily universe but comprise nearly 42 percent of total outstanding multifamily delinquencies.

Moody's Investors Service, New York, said the balance of delinquent CMBS conduit loans decreased to $16.43 billion in July from $17.02 billion in June. There were $796 million in resolutions, which far outweighed $201 million in newly delinquent loans.

The total balance of CMBS conduit loans outstanding increased to $346.8 billion in July from $344.3 billion in June, Moody's said. The balance of specially serviced loans decreased to $19.37 billion from $19.74 billion in June.

Moody's reported delinquency rates decreased for all regions. In the south the delinquency rate decreased to 3.62 percent from 3.83 percent in June. The west's delinquency rate decreased to 2.88 percent from 3.10 percent. The east's delinquency rate decreased to 5.22 percent from 5.41 percent. The Midwest has the highest delinquency rate, but also saw the largest drop, falling to 7.54 percent from 7.84 percent in June.

Meanwhile, DebtX, Boston, said the prices of commercial real estate loans underlying CMBS declined slightly in July. The estimated price of whole loans securing the CMBS universe decreased to 96.2 percent during the month from 96.5 percent at the end of June. Prices equaled 96.5 percent one year ago.

"The modest decline in loan prices in the CMBS universe in July can be primarily attributed to changes in the yield curve rather than credit quality," DebtX Managing Director Will Mercer said.

DebtX said the median adjusted loan-to-value ratio held steady at 58 percent and the median debt service coverage ratio remained unchanged at 1.52. The median estimated loan yields increased to 4.7 percent.

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