By at least two measures CMBS delinquencies took a notable upward turn in the last month, and by one measure new defaults also are still on the rise. But some observers believe the deterioration in performance is slowing in some areas and better days may lie ahead.
Fitch's CMBS delinquency index registered its first increase since last summer, and Trepp's data for the period registered a sharp jump just a month after late payments matched their lowest total in a year.
Some market observers, including Trepp, have predicted there would be a ramp up in commercial mortgage-backed securities delinquencies in 2012. This is because loans from 2007, when underwriting was particularly loose, come due this year.
But these observers also note that the next batch of securitized commercial mortgages to start maturing in 2013 will be those from the period where underwriting tightened severely, which could put downward pressure on delinquencies.
“So if you have a sharp increase this year, you're going to have an equally sharp decrease next year,” David Tobin, a principal at loan sales advisory firm Mission Capital Advisors, told this publication, commenting on the Trepp report.
Along with the increase in delinquencies, Fitch noted in a separate report that the new CMBS default rate is expected to rise to 14.5% this year from 12.7% at the end of last year due to concerns in certain sectors like office. But this indicator is not climbing as fast as it was, according to the rating agency.
“The slowing trajectory of cumulative CMBS defaults in 2011 make our 2012 year-end projection more emblematic of continued stabilization,” Fitch senior director Britt Johnson in an e-mail response to a question from this publication about the trend.