Delinquency rates on securitized commercial mortgages fell sharply in November for the first time in three months, but analysts at Trepp LLC don't see it as a trend.
Trepp said it sees “upward pressure” on commercial delinquency rates as properties financed with five-year balloons starting in 2007 are forced to payoff next year. “The day of reckoning is here for the class of 2007,” according to commentary Trepp issued in its November CMBS delinquency report.
The analytics firm noted that the 2007 vintage of loans had the weakest of underwriting standards, adding that many borrowers might have problems rolling over their notes.
Almost 19% of the “remaining” $15.5 billion of 2007 balloon mortgages are 30-days or more past due. “We expect that the majority (yes, the majority) will make their way to special servicing,” the Trepp report says.
The analysts point out that 46% of the $9.9 billion remaining 2006 class of CRE loans is delinquent.
The November Trepp delinquency report shows that 9.5% of securitized CRE loans are 30 days or more past due, down from 9.8% in October. A year ago, the delinquency rate was 8.9%.
“Even if the 2007 vintage is only 'as bad' as the 2006 vintage has been, the rate could easily go up by 75 basis points,” said Trepp senior managing director Manus Clancy.
The multifamily delinquency rate fell 55 basis points from October to 16.18% in November. However, multifamily loans continue to be the worst performing property type of all CMBS products.
