Trepp Reports More Maturing CMBS Loans Being Paid Off

Industry experts and regulators have been issuing dire warnings for months that the more than $1 trillion in commercial mortgages coming due over the next couple of

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years could be a hurdle that the real estate sector â€" and the entire national economy, for that matter â€" can't clear. They say most will fall into default because of a lack of capital.

But ""Trepp LLC"":http://www.trepp.com/, a New York-based company that tracks the commercial real estate market, says it's seeing a strong increase in the number of loans within commercial

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mortgage-backed securities (CMBS) that are being paid off in full at maturity.

Data released by the firm shows that 49.9 percent of the loans that reached their maturity date in July paid off on their balloon date. That's over 10 basis points higher than pay-offs recorded in June and is the largest percentage to be reconciled at maturity since December 2008.

According to Trepp’s research, over the last 12 months, the average percentage of loans by balance paying off each month has been 33.2 percent.

Prior to 2008, the payoff percentages were typically well above 70 percent, but since the beginning of 2009, Trepp says it has yet to see a single month where more than half of the balance of the loans reaching their balloon date actually paid off.

July’s number, though, came ever so close, and Trepp says it reinforces the notion that the recovery in commercial real estate lending is still in the embryonic stages, but the sector is recovering nonetheless.

“In order to feel truly confident that lending for maturing CMBS loans is gaining traction, we would want to see this percentage exceed 50 percent for a period of three to four months,” the company said.