March Records Fastest Ever CMBS Delinquency Deterioration In History According To TREPP

Tyler Durden's picture

On top of the previously announced record delinquency rate for Fannie, here comes some even worse news out of commercial real estate, which together with record high downtown vacancy rates, should be enough to push all REITs to 1052 week highs tomorrow. RealPoint has just released its March CMBS delinquency data, according to which delinquencies hit an all time high 6%. Not to be ignored, according to TREPP this number is even worse, at nearly 8%, after the single biggest monthly spike in 30 day + delinquencies.

In February 2010, the delinquent unpaid balance for CMBS increased by another $1.87 billion, up to $47.82 billion from $45.94 billion a month prior. Aggregate delinquency increased despite a slight decrease in 30-day delinquency. The overall delinquent unpaid balance is up almost 300% from one-year ago (when only $11.98 billion of delinquent unpaid balance was reported for February  2009), and is now over 21 times the low point of $2.21 billion in March 2007. The distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 26th straight month – up by $2.88 billion (9%) from the previous month and $29.36 billion (420%) in the past year (up from only $6.98 billion in February 2009).

As Stuy Town is still current on its payment, RealPoint expects an even greater acceleration in CMBS delinquencies over the coming months:

With the $4.1 billion delinquency of the Extended Stay Hotel loan, the expected delinquency of the $3 billion Peter Cooper Village / Stuyvesant Town loan, 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.

And RealPoint is the optimist. The other commercial real estate expert, TREPP, estimates that the situation is much, much worse, with March 30+ Days % delinquent CMBS hitting 7.61% after being just 6.72% in February. Then again TREPP already counts Stuy Town as in "foreclosure", something RealPoint still refuses to do due a technicality.

The delinquency rate for commercial real estate loans in commercial mortgage-backed securities (CMBS) stepped up sharply in March. After February’s numbers showed delinquencies beginning to moderate, there was some guarded optimism. February's increase had been the smallest bump in nine months. March data threw cold water on any notion that CMBS delinquencies might be nearing their peak. The delinquency rate for commercial real estate loans in commercial mortgage-backed securities (CMBS) stepped up sharply in March. After February’s numbers showed delinquencies beginning to moderate, there was some guarded optimism. February's increase had been the smallest bump in nine months. March data threw cold water on any notion that CMBS delinquencies might be nearing their peak.

According to TREPP the lodging sector is still the worst hit, followed by multifamily, retail, industrial and office. We anticipate that the strength in Offices is a function of aggressively renegotiated leases, which will impact office REITs most, once the projected cash flow never shows up.

Then again, who needs bad news when you have Atari controlling a now sentient SkyNet.