The up-and-down delinquent unpaid balance on loans backing commercial mortgage bonds ended July with only a 3.5% drop from one year ago, according to Morningstar Credit Ratings.

The more than $60 billion in CMBS delinquencies remains 27 times higher than the low point in March 2007. The amount of troubled loans dropped in seven of the last 12 months, and such a choppy trend should continue for the rest of the year.

"The movement in both delinquent unpaid balance and percentage continues to be impacted by the size and amount of loan liquidations, modifications, extensions and resolutions reported on a monthly basis, along with new balloon maturity defaults," according to Morningstar. "These items, as a whole, should lead to continued volatility in delinquency levels for the remainder of 2012."

Analysts at the credit ratings agency said they are still monitoring a large number of still performing loans that may default when they are shut out of refinancing at the balloon maturity.

The 8.49% delinquency rate on CMBS loans is down for the second straight month, but analysts said they continue to expect the rate to near an unprecedented height of 9% heading into next year.

"A denial by special servicers of borrower requests for loan extensions, modifications or debt restructuring, or a decision by borrowers to surrender the collateral, is still a legitimate concern throughout 2012," analysts said.

The office-building sector contributed the most delinquencies over the past 12 months, making up more than 30% of all troubled loans in CMBS. The sector was followed by retail loans which accounted for nearly 24% of delinquencies.

Multifamily problem loans made up another 20%. However, the $3.64 billion in these delinquent loans plummeted from $15.8 billion one year ago.