Delinquency rates on securitized commercial mortgages continued to creep up in October with CMBS issuance slowing to a halt.
Trepp LLC reported Wednesday that the percentage of CMBS mortgages 30-days or more late reached 9.77% in October, up 21 basis points from the prior month, and 118 bps from a year ago.
The multifamily delinquency rate bucked the trend, falling 23 bps to 16.73%. However, multifamily loans continue to be the worst performing property type in the commercial mortgage-backed securities market.
Trepp analysts noted that the tone of the CMBS market has been "extremely negative" since the beginning of the summer. In October, "word of layoffs at origination and trading shops on Wall Street jolted the market further,” the firm said.
However, news of the European bailout plan last week "helped push CMBS spreads sharply lower and increased hope that the worst was behind the market for the time being," Trepp analysts said. (This week the Greek bailout was once again in doubt.)
Meanwhile, strategists at several Wall Street firms have reduced their estimates on CMBS issuance for this year and next.
At the start of 2011, Bank of America/Merrill Lynch strategists expected $45 billion of CMBS issuance, but the firm said following “this summer's events” it reduced its forecast to $25 billion, a target that likely will be met.
For 2012, the firm projects $20 billion in CMBS issuance. In a recent CMBS report, B of A/ML strategists estimated that issuance will be "very light" in the first quarter.
In addition, CMBS conduit originators are facing stiff competition from insurance companies and Fannie Mae and Freddie Mac. The "strong" bids by insurance companies and GSEs "makes it hard for conduit lenders to compete in the origination market, especially for high quality assets," the B of A/ML CMBS report says.
