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CMBS late payments reach post-crisis low

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Late payments on securitized commercial mortgages fell in November, resuming a yearlong downward trajectory that was interrupted only once, in October.

The overall delinquency rate for U.S. commercial real estate loans in CMBS is now 3.33%, a decrease of nine basis points from the October level.

The delinquency rate began to fall with consistency after June 2017 when its reading clocked in at 5.75%.; by that time much of the loans taken out just before the financial crisis, when underwriting criteria was much looser, had already been refinanced. The rate has now dropped in 15 of the 17 months from July 2017 to November 2018.

The November 2018 delinquency reading is 185 basis points lower than the year-ago level. Year to date, the rate has fallen 156 basis points. The November rate also represents a new post-financial crisis low for the reading. The delinquency rate’s peak of 10.34% was measured in July 2012.

The percentage of loans that are seriously delinquent (more than two months behind on payments, in foreclosure, repossessed, or past maturity and not making payments) is now 3.28%, down 10 basis points for the month.

However, the late payment rate for CMBS loans originated after the financial crisis ticked up two basis points, albeit from a low base, to 0.64% in November. The percentage of post-crisis loans that are seriously delinquent is now 0.59%, which is up one basis point month over month.

The delinquency rate for loans issued before the financial crisis jumped nine basis points higher to 46.45% in November. The percentage of legacy loans that are seriously delinquent is now 46.38%, which is up five basis points on the month.

By property type, the biggest decline in the delinquency rate was in offices, which fell 10 basis points to 2.04%.

The retail delinquency rate fell nine basis points to 5.3%; however, retail remains the worst performing major property type.

The lodging delinquency reading slid five basis points lower to 1.93%, retaking its claim as best-performing major property type.

Not every property type experienced declines; the multifamily delinquency rate climbed 16 basis points to 2.04% and the industrial delinquency rate rose 19 basis points to 3%.

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