CMBS Delinquencies Reach Highest Point in 6 Years
The largest new delinquency in July was the $267 million Gurnee Mills loan, which became 60 days delinquent during the month.
A credit rating and analysis firm has issued a report saying that commercial mortgage-backed securities are falling into delinquency at a high rate, fueled in large part by the COVID-19 pandemic.
According to a report from New York-based financial services firm Fitch Ratings, U.S. commercial mortgage-backed securities, or CMBS, delinquency rates rose for the fourth consecutive month in July, reaching its highest point since April 2014. The report said that in July, the loan delinquency rate rose by 139 basis points, from 3.59% in June, ending the month at 4.89%.
The report said the high rate is being driven by a surge of new delinquencies totaling $8.4 billion, which outpaces $1.7 billion in resolutions.
The report also said the velocity of loan transfers to special servicing still remains high, and the company expects the volume of specialty serviced loans to stay high through the rest of the summer.
Breaking things down further, the report said the delinquency rate in the retail market climber 372 basis points in July because of $4 billion new delinquencies outpacing $714 million restorations. In the retail delinquency rate, the report noted, is at a new peak with 11.58%, which is greater than the previous peak of 7.67%, which occurred in 2012.
The hotel delinquency rate is also now close to its prior peak, the report said, rising by 515 basis points in July, due to a $2.9 billion in new delinquencies over the $415 million of resolutions. The mixed use delinquency rate also increased 169 basis points because of $698 million in new delinquencies exceeding the $79 million in resolutions.
Fitch also reported seeing a growing number of 30-day loan delinquencies since the onset of the pandemic.
According to the report, the largest new delinquency in July was the $267 million Gurnee Mills loan, which became 60 days delinquent during the month. The largest resolution was the $210 million Eastview Mall and Commons loan.
The report said hotel and retail loans continue to lead the majority of new special servicing transfers.
When it comes to specialty servicing, the report said about 24% of the regional mall/outlet loans, or $7 billion of the company’s universe, are now in servicing. The report also said 32 regional mall loans, which were already in special servicing but were current, became delinquent in July. Of those loans, six are greater than $150 million.
The report also said that about $26.1 billion, or 1,131 loans, of Fitch’s universe was in special servicing. That stands at about 5.4% of the company’s universe, the report said, and marks an increase in $5.9 billion from the $21 billion in June.