CMBS Delinquency Rates Fall to Post-Crisis Low

Michael Tucker mtucker@mba.org

May 08, 2019


The commercial mortgage-backed securities delinquency rate fell six basis points to 2.82 percent in April, the lowest delinquency reading since the 2008 financial crisis.

Trepp, New York, said April's rate drop cancels out a slight increase in delinquencies in March. The delinquency rate has decreased by 154 basis points year over year.

"The CMBS sector continues to chug along nicely," said Trepp Senior Managing Director Manus Clancy. "Spreads have squeezed tighter thanks to favorable economic conditions and distressed legacy debt continues to be resolved at a healthy clip."

Clancy noted some soft spots in the market, including retail and student housing, but said CMBS issuance and performance remains steady and largely volatility-free for now.

Trepp said delinquencies among post-crisis CMBS 2.0 loans increased five basis points higher to 0.70 percent in April. The delinquency rate for CMBS 2.0+ loans has only increased just 15 basis points from a year ago. The delinquency rate for CMBS 1.0 debt originated before the financial crisis increased one basis point to 46.46 percent in April.

Fitch Ratings, New York, reported the retail sector delinquency rate decreased from 5.00 percent in March to 4.65 percent in April. The hotel sector CMBS loan delinquency rate also dropped, falling two basis points during April to 1.63 percent. Industrial sector CMBS loan delinquencies slipped one basis point in April to 0.95 percent.

The office sector's delinquency rate increased, moving from 2.56 percent in March to 2.64 percent in April. The multifamily delinquency rate also increased slightly to 0.53 percent, Fitch said.

The prices of commercial real estate loans underlying CMBS rose in March, reported DebtX, Boston. The estimated price of whole loans securing the CMBS universe increased to 98.2 percent on March 31 from 96.6 percent at the end of February. Prices equaled 96.7 percent in March 2018.

"The increase in loan prices in the CMBS universe in March was the result of a decrease in the Treasury yield curve," DebtX Managing Director Will Mercer said.

Fitch said it maintains a "stable" outlook on nearly 96 percent of its U.S. CMBS portfolio by balance. Most of the remaining bonds are either considered distressed (1.8 percent) or have a negative (1.5 percent) or positive outlook (0.2 percent), the ratings agency said.

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