CMBS Delinquency Rate Nears 9% after August Jump: Trepp

The delinquency rate for real estate loans held in commercial mortgage-backed securities (CMBS) accelerated in August after two successive months in which delinquency increases had moderated, according to ""Trepp LLC"":http://www.trepp.com, a New York-based company that tracks the commercial real estate market.

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The analysts at Trepp say the August numbers ""may give ammunition to those who argue that the commercial real estate crisis is far from over.""

The CMBS delinquency rate went up 21 basis points last month, after an increase of only 12 basis points in July. Trepp notes, though, that even at 21 basis points, the rise is well below the average jump of 35 basis points seen over the previous 11 months.

Overall, Trepp’s data show that 8.92 percent of commercial real estate loans backing securities are now 30 or more days delinquent, in foreclosure, or REO. The current delinquency level is once again the highest in the history of the CMBS industry.

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The increase for seriously impaired loans saw a similarly steep jump. Trepp reports that the percentage of loans seriously delinquent (60-plus-days, in foreclosure, REO, or non-performing balloons) was up 20 basis points.

The delinquency increases came despite the fact that the number of loan modifications remains elevated, Trepp says. The company’s analysts contend that the growth in loss mitigation activity in the sector will put downward pressure on the delinquency number as troubled loans get resolved and move from the delinquency category. REO loans that are liquidated will have a similar impact.

The average loss severity in 2010 for liquidated loans has been 45 percent, according to Trepp. However, the company points out that if losses are backed out for loans where shortfalls have been 2 percent or less, that loss severity percentage improves to 60 percent.

Based on Trepp’s market data, the retail sector was the only major commercial property type to improve in August. Its delinquency rate fell 14 basis points to 6.76 percent.

Hotel delinquencies jumped 51 basis points last month. At 18.92 percent, this sector continues to have the highest delinquency rate among the major property types.

The multifamily delinquency rate increased 53 basis points, giving it the second highest delinquency rate among major property types at 14.53 percent.

Office delinquencies were up 22 basis points, with the rate hitting 6.57 percent.

The industrial delinquency rate moved higher by 52 basis points to 6.56 percent. It is still the best performer among major property types.