Trepp LLC has released its August 2012 U.S. CMBS Delinquency Report which has found that after five consecutive months in which the Trepp CMBS Delinquency Rate increased, the long-anticipated leveling off of the rate became a reality in August. The delinquency rate dropped 21 basis points to 10.13 percent, the largest one-month drop since November 2011.
"It was a great summer for CMBS investors from a performance point of view, as spreads plunged sharply from Memorial Day to Labor Day," said Manus Clancy, senior managing director of Trepp LLC. "Now the market has something else to hang its hat on: Falling delinquency rates. We expected a near term peak in the summer and we got it. For the immediate future, the worst of the delinquencies should be behind us."
The improvement in the rate can be attributed to two primary factors. The first is the class of 2007 securitized loans, which Trepp has cited as having had a large impact in the monthly delinquency rates since the beginning of 2012. As most of the five-year loans have now passed their maturity date, the upward pressure that they put on the delinquency rate when they could not be refinanced is largely gone. The other main cause for the decrease is that loan resolutions remained elevated in August. Almost $1.5 billion in loans were resolved with losses. Removing these loans from the delinquent loan category resulted in significant downward pressure on the rate.
In addition, the percentage of loans in the database that are past their balloon date but are current in their interest rate, "performing balloons," also decreased in August. There are now $72.4 billion in loans with the special servicer. This represents almost 4,000 loans.