Weekly Wrap: Another month of declining CMBS delinquencies
The CMBS delinquency rate dropped for a third straight month in September – as the market gets closer to knowing whether it will soon reach ‘terminal delinquency velocity.”
In a new report, data research firm Trepp said the September delinquency rate was 8.92%, a decline of 10 basis points from August following an initial dip in July. The all-time high was 10.34% in July 2012.
While 1.4% of the September rate is for loans in the 30-day delinquency bucket (a slight uptick from August), the percentage of seriously delinquent 60-day plus loans (including REO, foreclosure and non-performing balloons) is up 29 basis points to 7.52%.
Year-over-year, the overall U.S. CMBS delinquency rate is up 641 basis points.
“The recent declines come with a caveat as we've noted before,” Trepp’s report on Thursday stated. “Some of the loans which are being identified as current have come as a result of forbearances being granted and borrowers being authorized to use reserves to bring debt service payments up to date.”
Trepp estimates about $20 billion in loans the private-label CMBS market have been granted forbearances to date.
How much further that tally grows will indicate whether the market is reaching what Trepp termed earlier this summer as “terminal delinquency velocity”: a belief that the borrowers who will need COVID-19 relief have already been accommodated.
“Put another way, if a borrower didn't need relief in April, May, or June there is a good chance the borrower won't be needing it now – although maturity defaults could still be an issue,” Trepp noted.
“However, with relief windows ending for some loans, an uptick in delinquencies in the future is possible.”