S&P: CMBS Late Pays Rising

The S&P U.S. CMBS delinquency rate, influenced by a few large loans, rose from 1.56% at the end of the first quarter to 1.69% at the end of the second, according to Standard & Poor's Ratings Services.The rate has been trending higher, but its rise has been "well contained" by the volume of new issuance of commercial mortgage-backed securities, said credit analysts Roy Chun and Larry Kay of S&P's Structured Finance Real Estate group. All asset classes had a net increase in delinquencies, the analysts said in the latest edition of CMBS Quarterly Insights. However, S&P said the number of current loans going into special servicing slowed in the second quarter, which could portend lower default levels in the future. Current but specially serviced loans rose 4.7% in the second quarter compared with a 16% increase in the first quarter, said Mr. Chun, a managing director in S&P's Structured Finance Surveillance group. Mr. Chun said CMBS losses are mounting, largely from dispositions of real estate owned. He said the increase could indicate that special servicers are more willing to accept losses because they perceive more risk in holding REO, given the state of the economy and unfavorable outlook for near-term property value increases.