Modification Leads to 25 Basis Point Cut in Conduit Loan Delinquencies

Conduit loan late payments fell 25 basis points in October as a $678 million mortgage was modified, Fitch Ratings says.

The modification of the Skyline Portfolio loan, secured by eight Falls Church, Va., office buildings, was responsible by itself for almost half of the improvement in the delinquency rate.

Late payments on the loans making up commercial-mortgage backed securities rated by Fitch were 6.32% in October, down from 6.57% a month earlier.

Skyline Portfolio was the second largest loan in default with only the Peter Cooper Village/Stuyvesant Town loan larger. The new No. 2, Two California Plaza, is likely to be sold by CWCapital and if it removed from the CMBS pool, it would drop the delinquency rate an additional 11 bps, Fitch says.

If the CWCapital sale includes all of the assets that Fitch expects, it could send the CMBS delinquency rate another 50 bps lower to around 5.8%, which would be the lowest level since December 2009.

In October, resolutions of $1.4 billion outpaced new delinquencies of $697 million. Additionally, Fitch-rated new issuance volume of $4.3 billion far exceeded the less than $1 billion in portfolio runoff.