The Factors Behind the CMBS Delinquency Rate Drop in February

The February 2014 edition of Trepp CMBS Research article “US CMBS Delinquency Report: Rate Plunges in February Due to Huge Loan Liquidations” provides a detailed analysis of the factors driving the delinquency rate. Following are some of the highlights of that article.

In February, the CMBS delinquency rate dropped 47 basis points, for the ninth straight month of rate improvement. The major factors of the change were as follows:
1. CW Capital liquidated $2.6 billion of distressed assets during the month, causing a 50 basis points improvement
2. Loans that cured totaled $1.3 billion caused an additional 25 basis points of improvement
3. Conversely, new delinquencies of $1.4 billion increased the delinquency rate by 26 basis points

Overall CMBS Numbers

1. The overall US CMBS delinquency rate in February is 6.78%
2. There are currently $36B in delinquent loans. This number excludes loans that are past maturity, but current on their payments
3. There are currently $45.1B in loans at the special servicers, representing over 2600 loans

CMS Commentary and Summary

The take-away here for CMBS Borrowers is that although the delinquency rates are declining, it is not the result of borrowers catching up on their debt service. The CW Capital liquidations reflect the disposal of distressed assets.

In the next four years, the remainder of mortgages — $400 Billion — on commercial properties made prior to 2008 will mature. Most existing TIC mortgages fall into this category, and industry experts project that a large percentage of these loans will default.

CMBS borrowers – and TIC borrowers in particular – should start developing their Exit Strategy / Plan today. There is still time to maximize the value of your property – prior to your loan maturity.

There are a wide range of solutions, but you need to act now to make it happen.

Following is the full Trepp article and report: “US CMBS Delinquency Report: Rate Plunges in February Due to Huge Loan Liquidations”. Click Here to read the article For more information about Trepp, visit their web site: