The Trepp CMBS Delinquency Rate reversed course and is close to the highest reading of all time, according to the CMBS data provider. This happens just two months after matching its lowest reading in a year.
The highest rate on record was in July 2011 when it topped out at 9.88%. The rate rose an added 12 basis points in April after going up 31 basis points in March, Trepp stated.
The delinquency rate for U.S. commercial real estate loans in CMBS increased 12 basis points in April to 9.80%.
“The bucket is filling faster than it can be drained,” said Will Sledge, a managing director at Mission Capital Advisors in New York. “It’s not beyond what we have expected all along that five year delinquencies from poorly underwritten assets are bearing themselves out.”
Trepp said that following two months of comparatively modest loan loss resolutions at $1 billion or less, the special servicers became more active in April.
More than $1.4 billion in loss resolutions were seen this month. Taking out these loans from the delinquent loan category contributed roughly 24 basis points of downward pressure on the delinquency rate, Trepp explained.
Loans that were newly delinquent — roughly $3.8 billion — put upward pressure on the rate of about 64 basis points, while loans that were cured put downward pressure on the rate of 33 basis points, the data provider reported.
The effect of the loan resolutions, the impact of loans curing and the result of newly delinquent loans all resulted in a net increase of seven basis points in the rate.
Trepp stated that the remaining five basis points are a result of additions and subtractions to the denominator because of new-issue CMBS being added, loans paying off, as well as other factors.
According to Trepp, an area to look closely at is loans that are past their balloon date but current in their interest rate or "performing balloons", Trepp stated. This category currently comprises 1.16% of loans in the database. That has dipped slightly from 117 basis points last month. If these were considered late, the delinquency rate would have been 10.97%. Trepp has said that this category only made up 0.31% of the market in January 2011.