Fewer CMBS loans make scheduled balloon payments in February
Trepp, a provider of commercial mortgage-backed securities data, said 38.4% of CMBS loans made their scheduled balloon payments in February, compared to 38.7% a month earlier. Furthermore, delinquencies in the space are also rising. When analyzing data from the past 12 months, Trepp said on average, 35.8% of CMBS loan holders made these particular payments on time. Even though the average payoff rate is higher than 30%, it's still well below peak levels. In August 2008 — a month before the stock market's dramatic drop — 74.5% of CMBS loans managed to send in their scheduled balloon payments on time. A short six months later, balloon payoff rates on CMBS loans had fallen well below 40%, Trepp data shows. Other data on CMBS loans warns of other frailties in the segment. CMBS loans originated in 2007 could face the most losses due to weaker underwriting standards, a recent report from Standard & Poor's says. In a recent study, S&P researcher Howard Esaki assessed the risks underlying CMBS originations. To formulate his opinions, he studied a 10-year period, evaluating a dozen key economic indicators, including underwriting guidelines and real estate market conditions at the point of origination. CMBS loans originated in 2011 are expected to perform better than 2007 loans, thanks to tighter underwriting guidelines imposed during the recession. The delinquency rate on loans included in CMBS conduit/fusion transactions increased 17 basis points in February to 9.18%, according to the Moody's Investors Service delinquency tracker. The level of delinquencies has increased every month since June. During February, loans totaling $4.1 billion became newly delinquent, while about $3 billion of previously delinquent loans became current, worked out, or disposed of, Moody's said in a statement. In all, the total number of delinquent loans increased to 4,112 in February from 4,052 in January, and the total balance of delinquent loans increased to $56.8 billion from $55.7 billion Write to Kerri Panchuk.