Growth in new CMBS issuances reduces delinquency rate: Fitch

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Commercial mortgage-backed securities delinquency rates are likely to continue to decrease for the rest of the year, as new issuances outpace maturing loans and precrisis loans continued to get resolved by special servicers, Fitch Ratings said.

The 60-day delinquency rate for loans backing CMBS fell to 2.48% in August, compared with 2.64% in July. This is the fourth consecutive month of declines.

The delinquency rate is expected to finish 2018 between 2.25% and 2.75%, Fitch previously said. But if interest rates rise too quickly, that could affect the ability for loans maturing next year to refinance, which could cause defaults to rise.

Newly reported delinquencies were $115 million in August, the lowest since 2015, Fitch said in a press release. There are 582 loans totaling $9.8 billion in Fitch-rated transactions that are at least 60 days delinquent, in foreclosure or have become real estate owned.

Delinquencies from CMBS deals done prior to the crisis made up $8.6 billion, or over 88% of the total. Of this, 62% are REO.

New issuance volume for July was $7.1 billion from eight transactions while portfolio runoff was only $3.5 billion, resulting in a higher overall index denominator.

There were an additional $5.8 billion of new CMBS in August, which will be added to September's calculation. For the rest of 2018, there are only $6 billion of nondelinquent securities scheduled to mature.

Among commercial mortgage loan investor types, CMBS had the highest delinquency rate at the end of the second quarter, a recent Mortgage Bankers Association report said.

CMBS resolutions by special servicers in August totaled $652 million, of which 55% were REO from precrisis deals.

There were $377 billion of outstanding post-crisis CMBS and just $17 billion of precrisis deals rated by Fitch at the end of August.

Delinquency rates across all property types were the same or lower compared with July.

Retail had the highest delinquency rate at 5.31%, down from 5.6% in July. This was followed by office at 3.37%, down from 3.69%, and hotel at 2.33%, down from 2.51%. Mixed use was unchanged at 2.26%, industrial was down eight basis points to 2.18% and multifamily was unchanged at 0.45%.

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CMBS Delinquencies Foreclosures REO CRE Fitch
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