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Legacy CMBS Troubles Keep Piling Up

NEW YORK CITY-Trepp says the delinquency rate of 7.61% for legacy securities is the highest ever; Fitch and Moody's may downgrade more classes.

By Paul Bubny | Updated on April 02, 2010

NEW YORK CITY-Even as the future for newly issued CMBS looks bright, the fallout from legacy securities continues piling up. Trepp says the CMBS delinquency rate is now the highest ever, while Real Capital Analytics reports that CMBS loans have accounted for a majority of newly distressed situations thus far this year.

“To date in 2010, loans serving as collateral for CMBS issues have accounted for 72% of the newly distressed situations, sharply up from 40% in 2009 and 23% in 2008,” according to RCA in its monthly “US Capital Trends” report. While pointing out that it’s too soon to tell whether the worst is opver for banks, “it does appear that CMBS loans are likely to be more problematic than non-CMBS loans going forward.”

RCA notes that lenders have stepped up the pace of workouts in the past several weeks. As of the end of February, lenders had resolved $14.7 billion in distressed situations, while new distress was $13.7 billion for the first two months of the year. That the resolution of distress was greater than new inflows was “a significant milestone,” RCA says, but the tally makes “just a small dent” in the $157 billion of troubled situations.

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