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CMBS Performance Improves

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Mortgage Daily

                                                 December 28, 2011

The rate of delinquency on securitized commercial real estate loans was down 16 basis points last month thanks to a healthy improvement in the 90-day category. But the same report forecasts as much as a 100-basis-point increase in the delinquency rate next year.

As of the end of November, the 30-day delinquency rate on loans included in commercial mortgage-backed securities was 8.189 percent.

The rate retreated from October, when it was 8.346 percent, according to Morningstar Research.

But there has been no improvement from November 2010, when the rate was 8.126 percent.

The research firm sees potential for delinquency to deteriorate next year.

“A denial of borrower requests for loan modifications or debt restructuring by special servicers, or a decision by borrowers to surrender the collateral, is a legitimate concern heading into 2012,” the report said. “Based upon this concern and despite the recent liquidation activity experienced over the trailing 12-months, the delinquent unpaid balance for CMBS still has the potential to grow higher than 9 percent in 2012.”

The rate of all securitized CRE loans that were past due between 30 and 59 days was 0.88 percent last month, improving from 0.92 percent a month earlier.

Foreclosures moved up to 2.06 percent from 2.05 percent, while real estate owned climbed to 1.97 percent from 1.90 percent.

But a 75-basis-point improvement in the 90-day category offset other distressed sectors.

“As a whole, the distressed categories of 90+-day, foreclosure and REO decreased in aggregate by $1.36 billion in November 2011, following a $939 million increase in October 2011,” Morningstar stated. “Similar to the overall trend of volatility, a decline had been experienced in four of the previous six reporting periods for these figures.”

The balance of all delinquent CMBS loans was $59.9 billion as of November, down from $61.3 billion a month earlier.

The aggregate balance of all CMBS loans — current and delinquent, agency and non-agency — in Morningstar’s report was $731.5 billion as of Nov. 30, lower than October’s $734.2 billion.

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