Delinquencies on loans in commercial mortgage-backed securities rose by the smallest amount in 11 months in June but could accelerate again, according to a new report from Fitch.
Over the past 18 months the struggling U.S. economy and resulting recession have driven commercial rents and occupancy levels down, hurting the ability of property owners to pay their mortgages.
Some landlords have dipped into reserve accounts and savings to cover debt service on properties producing lower-than-expected cash flow.
Fitch managing director Mary MacNeill says borrowers unable to access capital for the cost of attracting tenants and those unable to restructure loans may stop subsidizing interest payments to their commercial mortgage lenders.
Meanwhile, investors seeking to refinance maturing loans or repay them by selling the underlying property have had trouble as property values have fallen.
Fitch said its CMBS delinquency index rose to 8.14% in June from 7.97% in May.
The hotel sector continued to have the highest delinquencies, although the rate was flat at 18.6%.
