CMBS market gains momentum, concerns linger
The delinquent unpaid balance from commercial mortgage-backed securities appears to be improving on a monthly basis, decreasing for the eighth consecutive month through February, said Morningstar Inc. in its latest report.
The unpaid principal balance slipped to $52.14 billion, or 7.23%, in February, down from $52.55, or 7.32%, in January. It's also down from a tailing 12-month high of $60.49 billion, or 8.48%, back in June.
While all signs point toward a positive CMBS market, concerns still linger including modifications or debut restricting, a denial by servicers of borrower request for loan extensions and decisions by borrowers to submit their collateral.
"Based upon these concerns and despite ongoing financing activity experienced over the trailing 12-months, the delinquent unpaid balance for CMBS in 2013 still has the potential to grow. While unlikely, this remains a reality under more heavily stressed scenarios involving additional large loan defaults driven by several of these high risk loans (especially those from 2005-2008 vintage transactions), along with continued expected balloon maturity defaults where refinancing is not readily available," the report explained.
Meanwhile, the total balance of loans in foreclosure and real estate-owned properties continues to experience volatility due to various factors including liquidation volume.
"We note a decreasing trend in the 90+ day category from one-year ago, but the REO category has coincidently been on the rise while the foreclosure category has recently leveled off some," Morningstar said.
In regards to property type, delinquent multifamily loans made up 1.36% of the CMBS market with a delinquency rate of 4.8% in Feb., down from 5.2% from the previous month.
Additionally, multifamily loan delinquency was $4.1 billion in Feb., down from $13.8 billion last year.
"An overall recovery in the multi-family sector has led to increased lending and a decline in multi-family delinquency (outside of maturity defaults from mostly older vintage properties)," the report stated.