CMBS Delinquency Rate Hits Lowest Level in Nearly Three Years

The Trepp CMBS Delinquency Rate posted its lowest level in almost three years in June. The 42-basis-point drop was the second biggest one-month improvement since Trepp began publishing the monthly rate in the fall of 2009. The delinquency rate for U.S. commercial real estate loans in CMBS was 8.65 percent in June. This was the first time the rate has dropped below nine percent since November 2010 and the lowest percentage since October 2010. Loan resolutions have been the main driver behind the delinquency rate improvement so far in 2013. June was no exception with over $1 billion in loan resolutions, up sharply from May’s total of $858 million. While the removal of these loans from the delinquent category placed a fair amount of downward pressure on the rate, this was completely negated by June’s newly delinquent loans, which were approximately half the total posted in May. The high number of loans that cured in June, totaling well over two billion dollars, helped spur the month-over-month improvement. One large office loan that had been listed as late last month was marked as current again this month, having been modified at the end of May. That status change alone contributed a 13 basis points drop in the delinquency rate. “The plunge in the delinquency rate was indicative of continued strength in the commercial real estate markets,” said Manus Clancy, senior managing director of Trepp. “However, by the end of June, investors were asking themselves if this is it for the time being. With interest rates and CMBS spreads rising sharply in June, two of the big drivers of the CRE gains were removed. Over the next six months, investors will get a good sense of just how enduring the gains of the last 12 months might be.”