Approximately 57% of all commercial mortgage-backed securities reaching their balloon date in March paid off as scheduled, according to the latest research from Trepp. This continues a sustained trend started last September where more than half the loans coming due have paid off on time, something not seen since the fall of 2008.
However, for the second time in the last four months, the number of loans paid off on time fell below the 60% mark, having hit
In a note accompanying the data, Trepp said, “Late last summer, we noted that the payoff rate could move to the upside. We mentioned that loans reaching their maturity date would likely be more heavily populated with loans from earlier vintages, and that assets from that time frame were made with lower leverage and more reasonable valuations. That trend was true for the better part of the last six months.
“We remind investors to be careful when trading IOs and older vintage premium AAA bonds. Spreads on premium AAA bonds from 2004 and 2005 have widened out considerably over the last two months as a reflection of this risk. More of these bonds should see a 'march toward par’ going forward as investors see a significant average life drop-off in a 100 CPY scenario.”
Trepp added that “with new issue CMBS spreads at extremely tight levels and the Treasury curve near historic lows, the percentage of 2007 loans capable of refinancing today is as good as it has been any time since before the real estate bubble burst.”
