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TREPP: US CMBS Delinquency Rate Plunges in December

The Trepp CMBS delinquency rate continued to drop in December, with a rate decrease of 23 basis points. December marks the seventh straight month of improvement in the rate. The delinquency rate for US commercial real estate loans in CMBS is now 7.43%.

The delinquency rate ended the year 228 basis points better than where it was at the end of 2012. Since reaching a peak level of 10.34% in 2012, the Trepp delinquency rate has dropped 291 basis points. In the November Delinquency Report, we noted that the final month of 2013 would likely bring significant gains. While that proved to be true in December, we still believe there is more room for improvement for the delinquency rate in the near-term, and that a rate below 7% could be in the cards before long.

December’s rate decrease can be attributed to the following:

  • About $1.3 billion in previously delinquent loans were resolved with losses. By removing these delinquent loans from the numerator, the rate saw 24 basis points of improvement.
  • Loans that cured totaled about $1.6 billion in December, which resulted in 30 basis points of downward pressure on the delinquent loan percentage.
  • New delinquencies also totaled about $1.6 billion in December. These loans pushed the rate up by 30 basis points, cancelling out the effects of loans that cured.

It appears that much of the $3 billion of distressed assets and additional note sales by special servicer CWCapital did not resolve in time for the December payment cycle. Removing these non-performing assets from the delinquent loan category will result in substantial decreases in the delinquency rate.

For those of you who just can’t get enough good news, here is one more tidbit from the December data: almost $1.5 billion in loans were defeased last month.

The Numbers:

  • The overall US CMBS delinquency rate decreased 23 basis points to 7.43%.
  • The percentage of loans 30+ days delinquent or in foreclosure:
    Dec ’13: 7.43% Nov ’13: 7.66% Oct ’13: 7.98%
  • The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) is now 7.20%, down 10 basis points for the month.
  • If defeased loans were taken out of the equation, the overall 30-day delinquency rate would be 7.73%–down 19 basis points from November.
  • There are currently $39.9 billion in delinquent loans. This number excludes loans that are past their balloon date but are current on their interest payments.
  • There are $49 billion in loans with the special servicer. This represents over 2,700 loans.

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