Morningstar: CMBS Delinquencies Stabilize

The delinquent unpaid balance for commercial mortgage-backed securities decreased in nine of the past 12 remittance periods through November 2012, “and is on the road to stabilization,” according to a Morningstar Credit Ratings report.

The report finds the delinquent CMBS balance decreased through the November 2012 remittance period to $55.2 billion, down from $55.55 billion in October, $57.53 billion in September 2012 and $58.59 billion in August 2012.

Such improvements, including the five straight month decreases at yearend, indicate the market has reached a plateau after “fluctuations for the four months that preceded the recent trend of decline.”

Analysts warn, however, that performance varies within the different types of securitized nonperforming loans.

For example, while the aggregate increase was at $259 million in November 2012, the aggregate value of the securitized seriously delinquent loans that were 90 days or more past due, foreclosures and real estate owned loans had decreased by $252.8 million in October, $578.8 million in September, $235.4 million in August and $510 million in July.

Foreclosure and REO, which represent the two most distressed categories, collectively decreased to $31.02 billion in November 2012, down from $31.07 billion in October, but nonetheless were higher than the $30.77 billion reported in September and $29.79 billion in August.

Also compared to $29.52 billion in November 2011, these loan categories remain up by $1.5 billion, or 5.1%.

Up to three of the five delinquency categories experienced a net increase in November 2012.

The 60-day and foreclosure delinquencies were the only categories that improved.

One reason, analysts wrote, is that “delinquent activity in November 2012 was directly affected by liquidations,” which totaled $802.6 million across 85 loans, at a slightly high average severity of 58%.

If the analysis focuses on the CMBS deals “seasoned for at least one year,” they note, results regarding legacy CMBS transactions under review show a total unpaid balance of $633.07 billion, with $55.04 billion of this balance delinquent.

Including legacy CMBS transactions, the delinquency rate is 8.7% and consistent with a month prior but down from 9.4% six months ago.

But if that factor is removed from the equation, deals seasoned at least a year had a total unpaid balance of $572.21 billion, with $55.01 billion of this balance being delinquent—at a 9.61% delinquency rate, up from 9.55% a month prior and from 10.16% six months ago.