Barclays: Change in Mod Trend Brings CMBS Delinquencies Down

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Barclays: Change in Mod Trend Brings CMBS Delinquencies Down

A higher pace in modifications and liquidations of securitized commercialmortgage loans has helped improve the CMBS delinquency rate in June.

According to Barclays, after increasing in May the number of CMBS loans 60 or more days past due in the pre-2009 vintage category, which remains high risk, “resumed its decline” in June dropping 15 basis points to 9.8%.

After including new issuance the so-called serious delinquency rate is at 8.2%.

“Most of the improvement came from a renewed spurt in liquidations and modifications” that reduced the over 60-day delinquent rate by 65 bps in June, up from 40 bps in May, analysts wrote.

Overall in June the rate improved mainly due to a pickup in the pace of new modifications, “which has been declining for the past year.”

At the same time the share of new 60 days or more delinquent loans “remained roughly constant,” adding about 40 bps to the delinquency rate, with an additional 10 bps analysts attributed to current loans paying down, “leading to a net 15 basis point decrease.”

Another positive factor was the refinancing performance for loans maturing in 2013, which also improved following analysts’ expectations based on “the higher quality of collateral coming up to their balloon date.”

Barclays’ estimations indicate that of all loans due to mature in June 2013, only 19% were unable to find financing and still remain outstanding.

Liquidation volumes, which rose sharply in June after a slowdown May, also contributed to the monthly delinquency rate decline.

Data show an estimated $1.1 billion of collateral was liquidated in June “with at least 3% severity,” up from $700 million in May.

The resulting increase in loss severities was 63%, up from 61% last month, following the disposal of several large loans.

Extended average roll time from special servicing to liquidation that increased in June after “several heavily delinquent loans” resolved at high severity, analysts wrote, affected the liquidation volume because “loans that liquidated this month first entered special nearly 31 months ago.”

Resolutions during the month brought the special servicing rate down 30 bps.

The largest loans to transfer into special servicing were the $120 million Montehiedra Town Center in GCCFC 2006-GG7, as a modification candidate, and the $92 million Cerritos Corporate Center in MLMT 2006-C1.

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