CMBS Delinquencies Hit New All-Time High

Overdue loans in pools of commercial mortgage-backed securities (CMBS) continue to mount. With each passing month, CMBS delinquency rates jump to another record high â€" and April held true to form.

[IMAGE]

The delinquency rate for commercial real estate loans in CMBS climbed higher still last month, although the rate of increase slowed from March's breakneck pace, the research firm ""Trepp LLC"":http://www.trepp.com reported Monday.

According to Trepp's monthly study, the percentage of CMBS loans 30 or more days delinquent, in foreclosure, or classified as REO jumped 41 basis points during April, putting the overall delinquency rate at 8.02 percent, the highest in CMBS history.

While the modestly lower increase in the delinquency rate month to month may be reason for optimism, Trepp says the percentage of loans seriously impaired remains sobering.

[COLUMN_BREAK]

Last month, the market was taken by surprise when delinquencies shot up 89 basis points. About 40 basis points of that increase was due to the massive Stuyvesant Town loan turning delinquent. Even so, Trepp says the 49 basis point net increase was still more than twice the increase posted in February.

The firm's study shows that multifamily was the only major property type to post a decrease in its delinquency rate, falling from 13.19 percent in March to 13.06 percent in April. Hotel delinquencies moved above 17 percent, again posting the highest rate among all property types. Office delinquencies, though, showed the largest increase during the month, up 64 basis points to 5.37 percent.

""Fitch Ratings"":http://www.fitchratings.com says the default rate for its CMBS-rated universe is even higher, hitting 8.15 percent at the end of Q1 2010. That's a steep increase from 6.59 percent at year-end 2009 and tracking the agency's prediction of hitting 11 percent by the end of 2010.

According to Fitch's market analysis, during the first three months of this year, 487 loans defaulted totaling $8.43 billion. As the firm's analysts have forecasted, the trend in large loan defaults, meaning those over $50 million, is occurring at a greater pace. In the first quarter alone, Fitch says 20 large loans defaulted, compared to 56 in all of 2009 and only five in 2008.

In Fitch's study, 85 percent of all new defaults are from 2005 to 2008 vintages. Multifamily far exceeds all other property types in terms of total defaults by dollar balance in Q1, at $35 million. Based on the sheer number of loans to go bad, retail takes the top spot with 28 percent of all new defaults last quarter.