Another Record In CMBS Delinquencies

The announcement by Fitch that CMBS delinquencies rose by another 29 bps to a new high of 6.29% is no surprise to anyone who has been following RealPoint's remittance/CMBS reports. Yet it is good to get independent confirmation that there is no respite in CMBS land. And with TALF for existing and new loans expiring on March 31 and June 31 respectively, without ever really taking of, this sector of the market is sure to face increasing pressure, especially when coupled with the certain increase in MBS rates once the last $30 billion or so in QE is purchased. The most recent culprit for deterioration: maturities of 5 year loans from the 2005 vintage as the refi market is still practically dead: "Approximately 30% of the newly delinquent loans were from 2005 transactions. In fact, the four largest newly delinquent loans (ranging in size from $65 million to $112 million) are from this vintage. Three of these four loans are past their 2010 maturity dates and are, therefore, categorized as non-performing matured loans."

Full Fitch report:

Fitch Ratings-New York-08 March 2010: Upcoming maturities from U.S. CMBS deals originated in 2005 contributed to a 29 basis-point (bp) increase in delinquencies to 6.29% at the end of February, according to the latest U.S. CMBS delinquency index results from Fitch Ratings.

Approximately 30% of the newly delinquent loans were from 2005 transactions. In fact, the four largest newly delinquent loans (ranging in size from $65 million to $112 million) are from this vintage. Three of these four loans are past their 2010 maturity dates and are, therefore, categorized as non-performing matured loans.

"Five-year loans originated in 2005 will continue to have difficulty refinancing this year as liquidity remains limited,' according to Managing Director Mary MacNeill. 'In many cases, sponsors will have to either contribute additional equity in order to refinance their loans or look to the servicers for extensions and modifications."

For the first time, office properties saw a greater than overall average increase in the index, with a 45 bp movement month over month in comparison to the overall index of 29 bps as three of the top four newly delinquent loans are office properties. Multifamily and industrial also exceeded the overall index change at 64 and 43 bps respectively. When the Peter Cooper Village/Stuyvesant Town loan hits 60 days delinquent, the overall index will increase 60 bps and multifamily will increase by over 400 bps.

Current delinquency rates by property type are as follows:

Office: 3.50%;
Hotel: 16.61%;
Retail: 5.09%;
Multifamily: 8.97%;
Industrial: 4.16%.

Fitch's delinquency index includes 2,505 loans totaling $28.5 billion of the Fitch rated universe of approximately 42,000 loans comprising $452.6 billion that are at least 60 days delinquent or in foreclosure. The Index excludes Fitch-rated loans that are 30 to 59 days delinquent, which currently total
$3.2 billion.