Delinquencies on loans used as collateral for commercial mortgage-backed securities continued to rise in July, calling into question earlier predictions that late payments would subside in the second half of the year, Trepp Analytics said Monday.
The delinquency rate for commercial real estate loans rose 18 basis points to 10.36% in July, an all-time high, Trepp said. That delinquency level is up 97 basis points from February, making July the fifth consecutive month of delinquency rate increases.
A year ago, the CMBS delinquency rate hit 9.88%. It then fell to 9.52% six months ago before edging back up to the current July delinquency rate, according to Trepp data.
“The increasing delinquency level had been driven by a wave of 2007 loans that had reached their balloon dates but could not be refinanced,” Trepp said in its report. “With the volume of these troublesome 2007 loans hitting a peak in the first half of 2012, we believed the second half of the year would be kinder to the delinquency rate.”
Trepp said it still believes that prediction is right, but the month of July brought no signs of improvement in terms of CMBS delinquencies.
The only property type to experience improvement in terms of loan delinquencies was the retail segment. Higher delinquency rates were reported in the lodging, office, residential and industrial space in July.
“One category to keep an eye on is loans that are past their balloon date but are current in their interest rate,” Trepp wrote. “This category now accounts for 1.29% of loans in the database. If we were to consider those loans late, the delinquency rate would have been 11.63% — an increase of 20 basis points from the equivalent June total. As we have noted in months prior, this category only accounted for 0.31% of the market in January 2011.”
To date, $59.5 billion CMBS loans are delinquent, the research firm said.
