Fitch Data Show Slight CMBS Delinquency Drop


Fitch’s U.S. commercial mortgage-backed securities report shows 2011 ending with another decrease in delinquencies during December, but notes that office delinquencies are continuing on an upward trajectory.

According to Fitch, overall CMBS delinquencies fell four basis points to 8.37% but office delinquencies rose to 6.84%, setting a new record above their previous high of 6.64% in July 2011. The company’s data show that overall, CMBS delinquencies have declined for five months in a row.

Loans during 2011 generally experienced a “slowing in the number of new defaults as the year went by,” Huxley Somerville, head of U.S. CMBS at Fitch Ratings, said in a recent conference call reviewing 2011’s performance and the outlook for 2012. But as the aforementioned office sector data show, performance is continuing to vary by property type.

In December, retail delinquencies also increased, rising to 6.89% from 6.63% the previous month. But this sector’s delinquency rate was lower than it was at year-end 2010 when it was 7.2%.

Multifamily delinquencies dropped to 14.42% from 15.71% the month before and these also were lower than they were at year-end 2010, as were hotel delinquencies, which month-to-month declined to 12.02% from 12.66%. Fitch noted that a key driver for hotels was several large loan resolutions, including the note sale of a large portfolio loan in September. (Some data providers may exclude larger loans from their delinquency statistics because they consider them aberrations.) After hotels, multifamily has seen its delinquencies fall the most of any majority property type.

At 10.25%, industrial delinquencies were far higher than they were at year-end 2010 when they were 6.24%, but they were down a little from 10.34% the previous month.

CMBS delinquency numbers can vary by provider due to slight differences in methodology. For example: Trepp recently indicated there was a seven bp increase in CMBS delinquencies in December, in contrast to Fitch.

Several companies, including Trepp and Fitch, have warned that more loans from periods of loose underwriting are coming due this year and may have trouble refinancing, which could cause an increase in delinquencies. So far past concerns about this have been overblown, in part due to extensions granted in some cases. But some are concerned that could change this year as loans from 2007, a year when loose underwriting appears to have peaked, come up for refinancing.

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