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Hotel Delinquency Leads CMBS Deterioration

An increase of more than 100 basis points in the delinquency rate on securitized lodging loans helped fuel deterioration in overall commercial-mortgage backed securities performance. The bad news comes as secondary market conditions have worsened over the past couple months. But one category had an improvement of more than 50 BPS.

Delinquency of at least 30 days, including foreclosures, on securitized commercial real estate loans was reported by Trepp LLC at 9.88 percent during July. It was the highest CMBS rate on record.

The amount of delinquent CRE loans was more than $61.3 billion.

Late payments were 9.37 percent in June, when $59.3 billion in commercial mortgages were delinquent. That month, delinquency had improved by 23 BPS from May.

The 51-basis-point rise between June and July was the biggest increase of the year.

“Much of the positive momentum that had been surrounding the CMBS market recently has now all but vanished in the past few weeks,” Trepp Managing Director Manus Clancy said in a statement Tuesday. “For the better part of the spring, the market was riding a wave of spread tightening, resulting in new issuance and falling delinquency levels.

“However, each of those positive reactions has taken a turn for the worse in the last two months.”

CMBS comprised of multifamily mortgages had a rate of 16.94 percent, 46 BPS worse than the previous month and the highest of any category.

Lodging mortgages erased much of the 150 BPS improvement made during June, climbing to 15.04 percent in July from 13.87 percent a month earlier.

CMBS with loans secured by industrial properties was the only category to show an improvement. At 11.09 percent, industrial delinquency was down 59 BPS from June.

CMBS with office mortgages deteriorated by 82 BPS to 8.17 percent. Office loans were the only group to see deterioration a month earlier.

At 7.85 percent, the delinquency rate on retail properties was 3 BPS above May’s level. But, despite the minor bump, retail delinquency was still the “best performing property type.”

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