The CMBS delinquency rate dropped sharply in October. The biggest reason for this dip was due to loans being liquidated at a faster pace and leaving the universe of troubled assets, according to a report from TreppWire.
Trepp also reported that the rise for seriously impaired loans also dipped. The percentage of loans seriously delinquent — 60+ days, in foreclosure, REO, or nonperforming balloons — is currently 7.96%, which is a drop of 35 basis points.
The Extended Stay Hotels (ESH) loan, the report said, was finally resolved in October. This loan accounts for around 59 basis points in the delinquency reduction. The loan had been delinquent since late 2009.
Last month, the delinquent $250 million 1775 Broadway transaction in New York lowered the delinquency rate by three to four basis points.
When the $3 billion Stuyvesant Town loan is resolved, according to Trepp, there will be an added 40 basis points worth of delinquencies removed.
"The bottom line is that as long as the volume of loan modifications and liquidations remains elevated there will continue to be downward pressure on the delinquency rate," Trepp said.
The overall October delinquency rate dropped 47 basis points. The percentage of loans 30 or more days delinquent, in foreclosure or REO is now at 8.58%, Trepp said.
After eliminating the ESH effect, the CMBS data firm said that delinquencies increased only 12 basis points.
The last time the delinquency rate dipped was in the summer of 2009. That drop was mostly because of many General Growth Properties’ (GGP) loans categorized as late one month earlier or at the beginning of GGP's bankruptcy process, the report indicated.
The rate of increase has averaged 29 basis points per month in the previous 12 months, This is after removing the Stuyvesant Town impact in March as well as the ESH impact this month.