The sharp drop in delinquencies of securitized commercial loans in January belies ongoing struggles in the hard-hit Atlanta region, according to the latest index results from Fitch Ratings.

Overall CMBS late-pays declined by eight basis points in January to 7.91% from 7.99% a month earlier. This marks the eighth straight month of declines and the lowest level since October 2010, when it stood at 7.78%.

In January, resolutions of $1.4 billion outpaced additions to the index of $1.1 billion. However, Fitch-rated new issuance volume of $600 million fell short of $2.9 billion in portfolio runoff last month.

Offsetting the positive movement in overall delinquencies is Georgia, which continues to be a problem spot. The two largest loans entering Fitch’s index last month—the $71.1 million Millennium in Midtown (part of the deal GSMS 2006-GG6) and $67.7 million Southlake Mall (part of BSCMS 2007-PWR18)—are both located in Atlanta. This helped push the delinquency rate for Georgia to 20%. This represents the second-highest rate of any state with at least $5 billion in CMBS outstanding (behind Nevada at 20.7%).

And it appears the worst is not over for this region.

Fitch took a closer look at Atlanta office loans greater than $10 million that were bank-owned as of the start of last year. Of those, four loans totaling $88 million were disposed of. It took an average of 18.2 months for those properties to be sold from the time they were foreclosed upon. The average loss severity was 78% of the original balance).

Additionally, loss severities for another six Atlanta office properties that were bank-owned at the start of last year and remain outstanding would be 52% based on recent appraisals. However, Fitch expects actual severities to be higher.

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