Trepp: CMBS Delinquency Sets All-Time Record in July

Mortgage & Real Estate

A Trepp report shows in July the overall U.S. delinquency rate of commercial mortgage-backed security loans jumped to 9.88%, an all-time record increase of 51 basis points compared to June—which is largely attributed to technical changes in data reporting and analytics.

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“Much of the positive momentum” in the CMBS market due to two consecutive positive monthly readings “has now all but vanished” the provider of CMBS market information, analytics and technology said.

The percentage of loans 30 days or more delinquent or in foreclosure increased from 9.37% the previous month and 9.60% in May, rates that nonetheless remained high from a historical perspective since one year ago, the overall U.S. delinquency rate was 8.71% and even six months ago, the overall U.S. delinquency rate was lower at 9.39%.

Despite the upward pressure added by changes in reporting standards, Trepp warned that findings add to current concerns about the commercial real estate market insiders who already are “worried about how borrowers were going to find enough financing to handle the wave of loan maturities hitting the market over the next few years.”

The current monthly CMBS delinquency reading surpasses the previous record because in July, at 9.88% the delinquency rate is the highest in the history of the CMBS market, up after two consecutive drops in the rate for May and June, “the first back-to-back monthly drop since the credit crisis began in 2008.”

If much of the jump “can be credited” to technical changes in the way some special servicers have been reporting data, yet Trepp did provide little insight on how much the CMBS delinquency rate would have changed had it implemented the same old criteria.

Historically, the Trepp Delinquency Rate treated a loan as delinquent when the servicer has said that they were pursuing a foreclosure strategy.  

The new way of classifying loans has allowed Trepp “to capture disintegrating stories” of loans that qualify as “delinquent,” even though that loan was being kept current by the liquidation of various reserves.

Daily Briefing | Tuesday, August 2, 2011

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