CMBS delinquencies, cure rates down
The delinquent unpaid balance on commercial mortgage-backed securities monitored by the credit ratings agency Morningstar dropped 5.2% in August. The company reviewed $730.6 billion in securities and found $58.9 billion in delinquencies, down from more than $62 billion the month before and the lowest total in more than one year. This $3.2 billion drop followed a $1.29 billion increase from June to July. "More importantly, a decline has now been experienced in three of the previous four reporting periods," Morningstar said. The majority of the troubled CMBS loans remain in the later stages of delinquency. According to Morningstar, roughly $49.9 billion of the delinquencies were in 90-plus day delinquency, foreclosure or REO. Commercial real estate plagues most of the smaller bank failures. An improvement in troubled loans could mean easing exposures for these smaller firms. But there is still plenty of room to go. According to Barclays Capital, early data for September showed a decline in the cure rate – or the percentage of loans moving from delinquency to current status to 3% from 6%. "It is probably too early to talk about the formation of a new trend signaling that fewer problem loans are able to cure; however, we find these data useful and will continue to monitor this trend," BarCap said. Morningstar also showed that while the delinquent unpaid balance on CMBS loans was down 4% from last year, it remains 26 times higher than the $2.2 billion low point in March 2007. Write to Jon Prior. Follow him on Twitter @JonAPrior.