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CMBS Delinquencies Hit Fresh Record, Now At $51 Billion, 268% Increase From Prior Year
The latest RealPoint monthly CMBS delinquency report update is out and it continues to get worse and worse. In March, the total amount of delinquent CMBS increased by $3.2 billion to $51.5 billion, or 6.4% of the total notional outstanding. "Overall, the delinquent unpaid balance is up almost 268% from one-year ago (when only $13.89 billion of delinquent unpaid balance was reported for March 2009), and is now over 23 times the low point of $2.21 billion in March 2007. The distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 27th straight month – up by $2.57 billion (7%) from the previous month and $30.31 billion (352%) in the past year (up from only $8.6 billion in February 2009)." And this data excludes the now defaulted Peter Cooper village which still remained current in March courtesy of its reserve. This loan will effectively go into real default in April or May at the latest, pushing the total delinquencies by at least another $3 billion. That's not the worst: RealPoint now sees the total delinquency rate surpassing 12% under a more stressed scenario, or double from here. Don't worry, the inability of the administration to delay the implosion of Commercial Real Estate is a victory of the bulls, and is just an indication of the "decoupling" of the CRE market fundamentals from the broader Alice in Lalaland parameters that set the everyday stock market.
From Realpoint:
With the combined potential for large-loan delinquency in the coming months and the recently experienced average growth month-over-month, Realpoint now projects the delinquent unpaid CMBS balance to continue along its current trend and grow to between $60 and $70 billion by mid 2010. Based upon an updated trend analysis, we now project the delinquency percentage to grow to between 8% and 9% through mid 2010, potentially approaching and surpassing 11% to 12% under more heavily stressed scenarios through the year-end 2010). This forecast / outlook is driven by the watchlist reporting of several Realpoint identified High Risk Loans from recent vintage transactions that continue to show signs of stress and are on the verge of delinquency, along with continued balloon maturity defaults from more seasoned transactions. As part of our monthly surveillance efforts of every CMBS transaction, we continue to monitor in detail many large Realpoint Watchlisted loans that have never met their pro-forma underwritten expectations. This includes a large amount of loans that remain current in payments but have already been transferred into special servicing - many of which may ultimately default based upon a denial of requests for loan modifications or debt restructuring by the special servicers, or a decision by borrowers to surrender the collateral.
Scenario 1 (Six-Month Historical Assumptions):
• Over the past six months, delinquency growth by unpaid balance has averaged roughly $3.22 billion per month. Assuming ongoing monthly pay-down and liquidation activity, if such delinquency average were increased by an additional 25% growth rate, and then carried through the second quarter 2010, the delinquent unpaid balance would reach $63.1 billion and reflect a delinquency percentage of 8% by June 2010. Carried through year-end 2010, the delinquent unpaid balance would top $87 billion and reflect a delinquency percentage just above 11% by December 2010.
• In addition to this growth scenario, when we add-in the default of the $3 billion Peter Cooper Village / Stuyvesant Town loan, the delinquent unpaid balance would reach $66 billion and reflect a delinquency percentage of 8.3% by June 2010. Carried through year-end 2010, the delinquent unpaid balance would top $90 billion and reflect a delinquency percentage near 11.5% by June 2010.Scenario 2 (Three-Month Historical Assumptions):
• Over the past three months, delinquency growth by unpaid balance has averaged a slightly lower $3.14 billion per month. Assuming ongoing monthly pay-down and liquidation activity, if such delinquency average were increased by an additional 25% growth rate, and then carried through the second quarter 2010, the delinquent unpaid balance would reach $62.8 billion and reflect a delinquency percentage slightly above 7.9% by June 2010. Carried through yearend 2010, the delinquent unpaid balance would reach $86 billion and reflect a delinquency percentage near 11% by December 2010.
• In addition to this growth scenario, if we add-in the default of the $3 billion Peter Cooper Village / Stuyvesant Town loan, the delinquent unpaid balance would reach $65.8 billion and reflect a delinquency percentage near 8.2% by June 2010. Carried through year-end 2010, the delinquent unpaid balance would reach $89 billion and reflect a delinquency percentage near 11.2% by December 2010.
We are curious just how much of the ongoing deterioration trend in CMBS was taken into account by banks, all of which decided to reduce the loss reserves in the prior quarter.
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"We are curious just how much of the ongoing deterioration trend in CMBS was taken into account by banks, all of which decided to reduce the loss reserves in the prior quarter. "
Which banks?? come on, give us some hints??
Seems the debt jubilee is coming, whether the issuers like it or not.
You might find this useful for answering that question:
http://www.wlmlab.com/main.asp
I've been waiting for months for this to have an impact and still it seems like it's being ignored. Thanks for the info.
Nero fiddled while Rome burned...... The stock market is a make believe sci ops instruement that is not based on fundamentals. Its up- ward girations are just being used to calm the sheeple. Those blind bulls that ride along for profits will be butchered when the illusion can no longer be easily facilitated. End Game on the Horizon.
you inglsh nd gramer is ver gud and makes me thnk yur nt crzy. thnkfor posting genus.
Buy IYR - Play Bernie and the Bubble
I'm getting worried...
Hold me, Harry
The sci ops department of the World Gov't knows that stock market profits, and twisted statistics created by quantitave easing, will keep this illusionary system afloat in the minds of the ordinary folks (slaves). Even though the economic system is no longer sustainable, it stays alive in esscense, by the power of the sheeples minds. I give the NWO Commision a thumbs up........Bravo. This is truely entertaining.
people. it is psy ops, not sci. as in psychological operations. thank you and have a nice day.
Just another reason to buy a REIT today!
I wonder if Bernanke has taken a write-down yet? Will just allow room for more QE.
Interesting to look at the difference in reported delinquency rates by lender type - listed near the bottom of this release by the MBA - http://www.mortgagebankers.org/NewsandMedia/PressCenter/72156.htm. Even allowing for the differences in the way the lenders report delinquencies the performance of the securitized stuff looks awful. CMBS hasn't been around that long but has crashed twice now - 98 being the other.
Small final comment. The CMBS guys hate the concept of retaining some risk - claim the b-piece buyers serve the same function. B*llsh*t. Contra-example - Fannie's multifamily loans are (mostly) originated under a model in which the originator retains some risk. I made a q&d calc of the loss rate from the retained risk book using data from the 2009 10k and the credit supplement - the 2009 loss rate is in the range of 20 bps on the book.
And of course we all know, statistically speaking precisely zero-percent of those 90+ day delinquent loans will heal - they are total losses. The next tier down will likely have spectacularly underwhelming heal rates as well - we can probably safely write off at least 2/3 of those. Another $100B, en fuego.
Fire up the chopper, Ben. We need some more of that mad-QE money.
Some freaking recovery we have here, eh? A solid B+, at least.
Currently, SP500 futures indicate that the March 2009 bear market rally may be ending. We should get confirmation this week.
MARKET UPDATES:
http://www.zerohedge.com/forum/latest-market-outlook-0
As much as some of you rag on people like Harry, he's been right lately a lot more than you. I decided to stop fighting the trend. Incorporated that heavily into my revised trading formulas. Anyway, tracking the popular ETF's, an interesting development happened recently. DRN hopped over DRV on my short screen (#9 & #10 slots). The top 10 list has been exclusively bearish ETF's (again, looking for shorts, so indirectly, that's a bullish outlook obviously). So DRN cracking the list was intriguing. I shorted them yesterday @ 230 for small initially, and @ 239 later in the day for double. Closed @ 235. -4% premarket today to 226. Looking at when DRN bottomed in the past, they have a loonngg way to go based on any technical indicator you look at. For the record, EDZ has been #1 for a while. So I'm bullish on emerging markets -- after the market/SPY bottoms -- likely in a week or 2.
Ok read this about the worlds 8th largest economy, bigger than Greece:
http://jan.freedomblogging.com/2010/05/04/ceos-rank-calif-worst-for-busi...