Late payments on securitized commercial mortgages moved noticeably higher in June, as several large loans failed to pay off at maturity.
It was the fourth straight month that the rate has crept higher following two large decreases in January and February.
The delinquency rate for U.S. commercial real estate loans in CMBS is now 4.6%, an increase of 25 basis points from May, according to Trepp. The rate is still 85 basis points lower than it was a year earlier and 57 basis points lower than it was at the beginning of this year.
The delinquency rate reached its multi-year low of 4.15% in February 2016. The all-time high was 10.34% in July 2012.
In June, $900 million of CMBS loans that were previously delinquent paid off, either at a loss or at par. Removing these previously distressed assets from the numerator of the delinquency calculation helped move the rate down by 18 basis points. Another $500 million in delinquent loans were “cured,” or brought current, last month, which helped push delinquencies lower by another 10 basis points.
However, this was offset by over $2 billion in loans that became newly delinquent, putting 42 basis points of upward pressure on the delinquency rate.
Also putting upward pressure on the number was a falling denominator: over $13 billion in loans were paid off, forcing the remaining delinquent loans to have an increased weight.
Of note is the percentage of loans that were classified as "non-performing loans that were past their balloon date." That number jumped 14 basis points in June. These would be loans that reached
their maturity date and did not pay off or make an interest payment to satisfy the debt service.
Separately, loans that were past their maturity date but did make an interest payment jumped 22 basis points in June. Trepp does not include the latter category as delinquent, but it does serve as another data point that indicates that borrowers are having trouble refinancing their loans. This is particularly true of loans issued before the financial crisis.
The biggest jump in delinquent loans was in the retail sector, where the late pay rate rose 36 basis points in June to 5.72%. The lodging delinquency rate was up 31 basis points, to 3.27%; the office delinquency rate added 25 basis points, to 5.76%, and the industrial delinquency rate increased by 23 basis points to 5.95%.
Only in the multi-family sector did late payments decrease, by a single basis point, to 2.35%.
