And now a return to your normal programming — the ever-increasing amount of commercial mortgage-backed securities in delinquency…
July’s reduction in delinquent CMBS — the first monthly decrease since August 2008 — looks to have been a blip if Realpoint‘s latest report on the sector is anything to go by. It shows the delinquent unpaid balance for CMBS increasing to $28.16bn in August, or a rate of 3.47 per cent, up from the $25.68bn, or 3.14 per cent rate, recorded in July. Here’s the jump in chart-form:
As Realpoint reminds us, July’s reduction had a lot to do with the circa $4.8bn of CMBS related to General Growth Property, the bankrupt US mall operator, returned to current payment status that month. In fact, if GGP-related CMBS had been excluded from the delinquent balance for June, the growth trend in delinquent CMBS would have been pretty steady this summer. Now that the GGP-blip is out of the way, however, CMBS delinquency is free to go on with its normal upward trend line.
Here’s a bit more detail from Realpoint:
Overall, following the correction of the GGP-sponsored loans in July, we now expect the delinquent unpaid CMBS balance to continue along its current trend and grow towards $50 billion before the end of 2009. Based upon an updated trend analysis, we project the delinquency percentage to grow in excess of 6% before year-end 2009 (potentially approaching and surpassing 7-8% under more heavily stressed scenarios). This outlook is mostly due to the reporting of several large loans from recent vintage transactions that continue to show signs of stress and default, along with continued balloon maturity defaults from more seasoned vintage transactions. In addition, while we maintain our negative outlook for both the retail and hotel sectors for the remainder of 2009, we are closely monitoring the negative trends surrounding several large struggling multifamily loans in the New York MSA that have near-term default risk, and the lack of new issuance to offset the continued increases in delinquent unpaid balance.
If the current average continues — a monthly increase of about $2.7bn in the delinquent balance — that balance will reach $42bn by December 2009.
That’s a delinquency rate of 5.3 per cent.
Related links:
CMBstress – FT Alphaville
Less CMBStress? – FT Alphaville
CMBS loan delinquencies tick ever upward – FT Alphaville