Loan curing and new issuance helped the commercial mortgage-backed securities delinquency rate in February fall to 9.37%, down 15 basis points from the previous month. The value of delinquent loans stands at $56.4 billion.
According to data provider Trepp, a reduction in the value of loans resolved with losses to less than $1 billion from January's figure of $1.6 billion contributed to the declining delinquency rate.
Loans curing (60 basis points), new CMBS issuance and loans paying off in full (3 basis points combined) added to rate. Newly delinquent loans put 63 basis points of upward pressure on the rate.
A portion of the improvement in February was a change in status of about $900 million of loans. The loans are past their balloon date, but current in interest payments, and thus no longer classified as delinquent. The rate would have risen 22 basis points to 10.57% in February had these loans factored into the overall delinquency rate, Trepp said.
“The resolution of these performing, but past maturity loans will likely determine whether the delinquency rate rises or falls over the next 12 months,” Manus Clancy, senior managing director at Trepp, said.
But a troubling trend looms in the CMBS industry. Fitch Ratings recently said that special servicers, firms brought in to resolve distressed CMBS, are charging shadow fees, in a potentially irresponsible manner.
Fitch Senior Director Rob Rowan, said it is a "trend that potentially presents risk to bondholders, borrowers and the recovering CMBS market."
Shortly thereafter, distressed commercial loans in special servicing prompted Fitch to downgrade three classes of Bear Stearns commercial mortgage pass-through certificates, while upgrading another class because of an increased credit outlook on pay downs and loan defeasance.
Fitch also downgraded nine classes of MBS because of lagging performance of certain commercial and multifamily properties, including one containing the Credit Suisse (CS) headquarters in Manhattan.