Loan performance for commercial mortgage-backed securities improved again, and mortgages secured by apartment buildings saw the biggest decline. The outlook for the CMBS market has brightened considerably as spreads diminished and projections for new issuance grew.
Since reaching an all-time high of 10.36 percent in July, thirty-day delinquency on securitized commercial real estate loans has stabilized — down for the second consecutive month to 9.99 percent in September.
CMBS delinquency stood at 10.13 percent a month earlier. But delinquency has deteriorated from 9.56 percent a year earlier.
September’s rate reflected $1.77 billion in loans that were resolved with losses and $3.3 billion in loans that became newly delinquent, according to the data from Trepp LLC.
“The CMBS market is on its firmest footing in four years,” Trepp Senior Managing Director Manus Clancy said in the report. “Just this month, spreads fell precipitously, predictions for new CMBS issuance levels rose, and now delinquency levels have contracted.
“This is great news for the industry.”
The report went on to say that appetite for distressed CRE continues to be strong, while borrowing costs remain “extremely low.”
New CMBS issuance has seen a resurgence during the past three months — raising expectations for securitization volume over the next two quarters.
One other bright spot is a decline in upcoming balloon maturities.
Improvement in the rate of past-due CRE loans was bolstered by multifamily performance. The rate of multifamily late payments tumbled 81 basis points from August to 14.09 percent last month.
Performance on lodging loans also strengthened, with the rate retreating 38 BPS to 12.16 percent.
Office building loan delinquency eased to 10.48 percent from 10.56 percent, and past-due payments on retail property loans were down 9 BPS to 8.09 percent.
The overall rate might have been even better had it not been for mortgages on properties with industrial buildings on them. Industrial delinquency rose 9 BPS to 12.21 percent in September.
