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More Increases in CMBS Delinquencies, Particularly Office: Reports

""Moody's"":http://v3.moodys.com/Pages/default.aspx and ""Fitch Ratings"":http://www.fitchratings.com/index_fitchratings.cfm both reported increases in defaulted commercial mortgage-backed securities (CMBS) last month, of 24 and 18 basis points, respectively.

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Both companies show the office sector with the greatest increases in delinquencies across the five core property types in November.

According to the New York-based Moody's the increase to an 8.63 percent delinquency rate is a part of a moderate trend of increases that has continued for months. But offsetting the delinquent loans, which increased in November to 4,091, are the high numbers of resolution and liquidation of troubled loans.

November's 24 point increase is the largest increase since May, but before May the average monthly increase was more than 50 points per month. Year-to-date Moody's delinquency index has risen 373 points.

In a press release, Moody's said 294 loans became newly delinquent in November, and 245 previously delinquent loans became current, worked out, or disposed.

The index tracks all loans in United States conduit and fusion deals issue in 1998 or later with a current balance greater than zero.

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Moody's current delinquency rates by property type are:

* Multifamily: 13.90%

* Hotel: 16.42%

* Retail: 7.14%

* Industrial: 6.36%

* Office: 6.72%

According to Fitch Ratings, the CMBS delinquencies increased to 7.96 in November, following a decline in October.

The Fitch index includes 2,978 loans totaling $34.2 billion.

According to Fitch, office properties are extremely vulnerable right now, and the agency maintains a negative outlook on CMBS loans in this sector due to anticipated income declines across its rated portfolio.

""Office and retail properties fared well during the recession due to generally longer-term lease agreements, but they are now most vulnerable to asset-specific performance declines for the same reason,"" said Mary MacNeill, managing director of the New York-based firm.

She continued, ""As leases originated at the peak of the market come up for renewal, they will be marked down to lower market rents, pressuring operating income.""

Fitch's current delinquency rates by property type are:

* Multifamily: 14.75%

* Hotel: 14.27%

* Retail: 6.55%

* Industrial: 6.01%

* Office 5.63%

About Author: Joy Leopold

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