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March CMBS balloon payments plummet

The pay-off rate on commercial mortgage-backed securities loans making their scheduled balloon payments retreated to its lowest level in a year during the month of March, Trepp analytics said.

The payments hit 36.4% last month, a steep drop from 61.6% in February.

The only month in the past year with a lower reading than March was May 2011.

Balloon payments are a key component of the commercial mortgage-backed securities market. CMBS balloon payments come due in full after a certain period of time. The general expectation is that a large portion of that debt will be refinanced before a scheduled payment hits.

When analyzing the data by loan count, rather than balance, about 43.1% of the loans paid off in March. 

Before the financial crisis hit in 2008, the pay off percentages on CMBS loans remained well above 70% each month. That, however, changed in 2009. Since then, there have been only four months were more than half of the balance of loans reaching their balloon dates managed to pay off. 

kpanchuk@housingwire.com

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