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Trepp: CMBS Delinquency Rate Resumes Ascent in February

Late payments on securitized commercial mortgages resumed climbing in February, after an unexpected pause the previous month.

The delinquency rate for U.S. commercial real estate loans in CMBS is now 5.31%, an increase of 13 basis points in February, according to Trepp. The reading has consistently climbed over the past year as loans from 2006 and 2007 have reached their maturity dates and have not been paid off via refinancing.

The rate is now 116 basis points higher than the year-ago level. The reading hit a multi-year low of 4.15% in February 2016. The all-time high was 10.34% in July 2012, but the February 2017 reading is the highest since August 2015.

“In December report, we noted that it was hard to see the rate going down anytime in the near future,” the data provider stated in its monthly report. “That is a prediction we are comfortable standing by for at least the next few months as the ‘wall of maturities’ plays out.”

Office delinquencies helped push the rate higher in February. In fact, delinquency readings for four of the five major property types fell, but a large spike in the office sector more than offset those gains.

The industrial delinquency rate improved eight basis points to 5.94%; the lodging delinquency rate fell 13 basis points to 3.43%; the multifamily delinquency rate dipped 14 basis points to 2.82%; the office delinquency rate shot up 54 points to 7.65%; and the delinquency rate for retail loans came down 17 basis points to 5.93%.

In February, over $2.3 billion in loans became newly delinquent. This put 53 basis points of upward pressure on the delinquency rate. A sizable portion of that $2 billion came from notes that were current, but are now "nonperforming loans that are beyond the maturity date." Many of the larger loans in this category were office notes.

About $1.3 billion in CMBS loans that were previously delinquent paid off with a loss or at par last month, which helped mitigate the jump in new delinquencies. Removing those previously distressed assets from the numerator of the delinquency calculation moved the rate down by 30 basis points. Over $850 million in loans were cured last month, which helped push delinquencies lower by another 20 basis points. The shrinking denominator (outstanding loans in the calculation) accounted for the rest of the difference.

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