Trepp: CMBS Loan Delinquencies at Two-Year Low

Trepp LLC said delinquencies among loans used in commercial mortgage-backed securities are now at their lowest level in over two years.

For April, the delinquency rate for loans securing CMBS was 9.03%, down 47 basis points from March, the biggest month-to-month decline in the rate since Trepp started releasing this data in 2009. The rate in April 2012 was 9.8%.

Trepp added that the delinquency rate has not been this low since November 2010.

Loan resolutions of $1.6 billion, payoffs of $800 million and cures related to modifications pushed the delinquency rate down 80% before any new delinquencies are added back in.

And it noted the level of those new delinquencies was well below previous months’ averages.

"Everything is working for the CMBS market right now, and the result is a sharp drop in delinquencies," said Manus Clancy, senior managing director at Trepp. "Spreads remain low, allowing many formerly marginal properties to get refinancing.

“Special servicers are continuing to resolve many distressed assets with modifications and the pace of liquidation remains high. All of these factors should continue to push the rate steadily downward."

Meanwhile, the prices for loans used in CMBS increased 160 basis points during March, while at the same time prices for both impaired and nonperforming loans also increased, according to the latest information from DebtX.

As of March 31, the price for whole loans securing U.S. CMBS was 91.4%, up from 89.8% on Feb. 28, and 81.3% on March 31, 2012.

Will Mercer, DebtX managing director, said, “CMBS loan prices have broken through their recent highs. Given the essential flat yield curve, the price increase was primarily driven by stronger loan-to-value ratios, which is encouraging.”

The weighted average monthly price of impaired loans being traded through DebtX’s marketplace was 80.2% at the end of March, up 30 basis points over February and 900 basis points over March 2012. The weighted average monthly price for nonperforming loans was 53.4%, up 10 basis points from the prior month and 810 basis points from the prior year.

The only bad news is that marketplace liquidity declined. The Loan Liquidity Index was 95.6 versus 101 in February and 104.6 in March 2012.