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Downward Spiral Seen as CMBS Delinquency Rate Drops for Second Consecutive Month
Jul 06, 2011

For the first time since the credit crisis began in 2008, the commercial mortgage-backed securities (CMBS) delinquency rate has fallen for two consecutive months, according to Trepp. After a modest reduction in May, the delinquency rate fell sharply in June. The rate reduction was driven primarily by a spike in loans being resolved with losses, rather than delinquent loans actually curing. Overall, the delinquency rate for U.S. commercial real estate loans in CMBS dropped 23 basis points to 9.37 percent, the lowest the rate has been since February 2011. The 23 basis point drop comes on the heels of a five basis point dip in May. The drop was driven by the fact that about $1.8 billion worth of loans were liquidated in June. That was the highest total since Trepp began measuring the loss resolution numbers 18 months ago. The elimination of these troubled loans from the pool reduced the delinquency rate by about 28 basis points. The remaining loans in the index saw delinquencies rise approximately five basis points leading to a net reduction of 23 basis points overall. The percentage of loans seriously delinquent (60-plus days delinquent, in foreclosure, real estate-owned [REO] or non-performing balloons) is now 8.75 percent. By that measure, the rate was down 21 basis points. Highlights of Trepp's latest survey include: ►Overall, the U.S. delinquency rate fell to 9.37 percent, a decrease of 23 basis points ... one year ago, the overall U.S. delinquency rate was at 8.59 percent ►The percentage of loans 30-plus days delinquent or in foreclosure: June 11 was at 9.37 percent, May 11 was at 9.60 percent and April 11 was at 9.65 percent ►If defeased loans were taken out of the equation, the overall delinquency rate would be 9.85 percent, down 25 basis points from May 2011 ►The percentage of loans seriously delinquent (60-plus days delinquent, in foreclosure, in REO status or non-performing balloons) is at 8.75 percent, down 21 basis points from May 2011 ►Office delinquency rate up 12 basis points—only major property type to see rate rise—remains best performing major property type at 7.35 percent ►Lodging delinquency rate plunges—rate falls 150 basis points—now 13.87 percent ►Industrial delinquency rate falls 28 basis points—retreats modestly after months of sharp increases—now 11.68 percent ►Multifamily delinquency rate falls—down 23 basis points—remains worst major property type at 16.48 percent ►Retail delinquency rate falls 12 basis points to 7.82 percent
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