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Hotel Lates Improve, Leaving Multifamily as Worst Performer

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Following two months of improvement in the rate of delinquency on securitized commercial mortgages, the rate moved higher. But late payments on hotel loans fell, leaving multifamily mortgages as the worst-performing category of commercial real estate loans.

Delinquency of at least two months on loans in commercial mortgage-backed securities conduit and fusion transactions came in at 9.24 percent last month based on Moody’s Investors Service’s Delinquency Tracker. The increase reflected an $835 million increase in delinquent CMBS loans.

The deterioration followed two months of improvement.

CMBS delinquency was 9.02 percent in June and 7.89 percent in August 2010.

But loans in special servicing were 12.30 percent, an improvement of 5 basis points from June and the third consecutive decline.

“Given the elevated specially serviced loan rate and continued economic uncertainty, CMBS delinquencies are likely to remain in the high single-digit range for the near term,” Moody’s Director – CRE Research Tad Philipp predicted in the report.

Moody’s explained that with no new CMBS issuance in July, CMBS outstanding fell by $5.1 billion — helping to push the rate higher.

Last month’s rise in defaults was also helped by a rise in delinquent office mortgages, pushing the total balance of delinquent office loans to $14 billion. Delinquent office mortgages have increased $1.8 billion since the beginning of the year.

Also lifting overall delinquency higher were mortgages secured by retail properties.

There wasn’t much impact to overall CMBS delinquency from multifamily mortgages, which were mostly unchanged from 15.13 percent previously reported for June.

But hotel loans, which have suffered immensely since the onset of the Great Recession, fell 76 BPS from June to finish July at 15.00 percent. The balance of delinquent hotel loans fell to a one-year low as 35 loans were either worked out or disposed of.

The New York-based ratings agency noted that while delinquency rose for most CMBS vintages between 2000 and 2008, the 2003 vintage saw a six-basis-point decline and the 2008 vintage was off by a single basis point.

The 2001 vintage, however, skyrocketed 795 BPS to 33.78 percent. But Moody’s explained that this was primarily due to a decline in the overall outstanding for the year.

Delinquency in Nevada — which is loaded with hotel mortgages — was higher than any other state at 20.38 percent. Still, the Silver State’s rate was down more than 200 BPS last month as a result of a 900-basis-point improvement in Las Vegas.

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