The core delinquency rate for legacy CMBS in February had one of its smallest increases since the start of the credit crisis, according to the Trepp Delinquency Report.

The slowing delinquency rate in the legacy space validates that investor now have more faith in these assets, Trepp in its report said.

The delinquency rate for commercial real estate loans in CMBS rose five basis points in February, Trepp reported. This places the rate at 9.39%, which is the highest percentage of loans 30+ days delinquent, in foreclosure or REO in CMBS history. However, the five-basis-point rise is has been the smallest rise since Trepp started publishing its report 18 months ago.

According to the Trepp report, the market also saw a drop in the delinquency rate last October when the large Extended Stay Hotel (ESH) loan was liquidated at a loss.

"If one removes the ESH loan from the equation, February’s 5 basis point jump is the smallest in almost two years," the report said.

The overall U.S. delinquency rate rose to 9.39%, which is a five basis point increase, Trepp reported. The percentage of seriously delinquent loans — 60+ days delinquent, in foreclosure, REO or nonperforming balloons — is at 8.75%, increasing 16 basis points from January.

According to the report, the delinquency rate among multifamily assets remains the most challenged. The mulifamily rate dropped 24 basis points, which makes it the worst major property type with a delinquency rate of 16.6%  Meanwhile, the industrial rate has risen 32 basis points.

The sector's delinquency rate is currently at 10.44%, while the lodging delinquency rate drops 47 basis points, placing it back below 15%. Meanwhile, the office delinquency rate has increased 22 basis points, which places the rate above 7%. The retail delinquency rate at 7.81%, after it rises nine basis points

In terms of the CMBS secondary market, Trepp calls February another banner month. The
super senior spreads dipped sharply once again last month while the bigger gains are down the credit curve. The super senior spreads from the 2006 and 2007 vintages dropped an added 20 basis points while AM and AJ spreads fell 50 to 100 Basis Points - Prices Up $2 to $4 Double A and Single A Prices Up $6 to $8

As investors are still hunting for yield, triple-A CMBS super senior spreads decreased by around 20 basis points in February. The gains were more significant r for weaker 'AAA' paper and less for some of the better names and more seasoned transactions.

Most of the gains were achieved in the first half of last month, according to Trepp. Some of the spread compression was  given back late in the month. As concerns regarding the Middle East stability and oil prices took a bite out of U.S. equity markets, Trepp said that the CMBS secondary market "became caught up in the down draft."

According to Trepp, the benchmark GSMS 2007-GG10 A4 bond outperformed the CMBS broader market. Its spread dipped approximately 30 basis points for the month.

In the AM, AJ, double-A and single-A sectors, the spread gains were even more considerable. Once again investors saw prices melt up in the AM, AJ, double-A and single A sectors.

In the AM and AJ sectors, dollar prices moved up $2 to $4. Meanwhile, in the 'AA' and 'A' segments, Trepp said that the gains were around double that. As with the super seniors, the gains were mostly seen in the first part of the month.

The global concerns that took some of the wind out of the super senior market late in the month also took some of the appetite out of the AM through 'A' markets. This was specifically true in terms of the more "damaged" 2006 and 2007 deals.


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