Commercial Mortgage-Backed Securities Delinquency Rates and Loans Transferred to Special Servicing Continue to Increase

According to a report by Trepp, the percentage of commercial mortgage-backed securities loans in special servicing increased 49 basis points (0.49 percent) in November to 13.08 percent of the total outstanding balance. While many analysts feel we are at or near the high water mark, logic (including weak real estate fundamentals and a slowly recovering economy) dictates our thinking that we may still have a way to go as more and more borrowers decide that “non-recourse” getting out is a better strategy than working out.

The following chart provides a breakdown of loans in special servicing as of November 30^th:

What’s the play? Provide “Rescue Capital” in exchange for a preferred position in the capital stack.

Now to delinquencies. Fitch’s tracks CMBS loans that are either 60 days (or more) overdue or in foreclosure. As of November 30^th, Fitch reported that 2, 978 loans totaling $34.2 billion were either 60 days late or in foreclosure, up from 2,951 loans totaling $33.5 billion as of Halloween (October 31^st). Fitch tracks the performance of approximately $430.1 of CMBS transactions secured by approximately 38,000 commercial mortgages.

The following chart provides a breakdown of the percentage of CMBS loan balances in Fitch-rated deals that are delinquent by at least 60 days or are in foreclosure as of November 30^th:

What’s the play? Same as above; provide “Rescue Capital” in exchange for a preferred position in the capital stack.