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Morningstar: CMBS Market Continues Uneven Improvement

SEP 27, 2013 4:57pm ET
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The delinquent unpaid balance of securitized commercial mortgage loans continues to shrink dropping to a 12-month low in August, according to Morningstar, while foreclosure activity increases.

The August 2013 Morningstar Credit Ratings CMBS remittance report shows the delinquent UPB balance on these securities dropped to $45.87 billion, which represents 6.16% of the total volume, down from $46.74 billion, or 6.27% in the previous month.

It is the lowest level of delinquency since December 2009 when the delinquent UPB balance was $41.6 billion.

Overall, up to $3.13 billion in loan resolutions, including loan payoffs, liquidations and returns to performing status helped balance out $2.31 billion in newly delinquent loans reported during the month.

According to the report, delinquent activity in August 2013 “was again directly impacted by high monthly liquidations.” Liquidation returns on 94 loans at an average loss severity of 39.6% totaled $1.2 billion.

In August 2013 the aggregate volume of distressed CMBS assets—a category that includes loans 90 days or more delinquent, in foreclosure or REO status—decreased for the second consecutive month, down by $431.7 million in following a $944 million decrease in the previous month.

But a closer look shows that despite overall improvements the two most distressed categories of foreclosure and REO collectively increased by $249.4 million in July 2013, up $571.5 million compared to 2012.

In August 2013 the volume increased 1.9% from $29.8 billion in the same month of 2012.

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