Trepp: CMBS Delinquency Rate Takes a Downturn in August

For the third time in the last four months, Trepp said the delinquency rate for commercial mortgage-backed securities has dropped.

After increasing to a 9.88% rate in July, the CMBS market rebounded in August by falling 36 basis points to 9.52%. This represents the second largest decrease in the delinquency rate for U.S. commercial real estate loans in CMBS since the credit crisis began in 2008.

Last year at this time, the delinquency rate was at 8.92%.

“After a streak of bad readings that lasted from late spring through summer, the CMBS market was thirsting for some positive news,” Trepp said. “Between lenders pulling back, a failed deal closing, and concerns that European banks and the U.S. economy were headed for the rocks, CMBS investors had turned very bearish on CMBS' prospects. The drop in CMBS delinquencies in August appears to be the first piece of good news for the market in a while.”

The New York-based analytic firm said the rate is changing because of the way some special servicers have been reporting their data. Trepp said the delinquency rate was higher in July because special servicers began to flag many dual tracked loans in which they were pursuing a modification and a foreclosure strategy.

However, the firm said the special servicers backed away from this strategy in August, leading to the lower delinquency rate.

There was 8.79% CMBS loans classified as seriously delinquent—60 or more days past payment, in foreclosure or REO—in August. This is a decrease of 35 basis points from the previous month.  At the same time last year, the rate of loans seriously delinquent in the nation was 8.15%.

Multifamily homes had the worst delinquency rate for property types at 16.44%, a month-over-month drop of 50 basis points, while retail properties had the lowest delinquency rate at 7.38%, down 47 basis points from July.