September 5, 2018
Morningstar Credit Ratings’ latest report on commercial mortgage-backed securities (CMBS) reveal that the delinquency rate hit another post-crisis low of 2.05% in July, down 1 basis point from June and 99 basis points from a year ago. The national ratings organization believes the delinquency rate will hold below 2.5% for the rest of the year, as steady new issuance volume continues to push the outstanding balance of CMBS loans higher and special servicers resolve or liquidate assets.
Morningstar notes delinquencies from deals issued from 2010 through 2018 remain a small portion of the total, representing just 0.3% of the CMBS universe, while delinquent pre-crisis loans account for 1.7%.
Among the monthly highlights reported by the organization included:
- The payoff rate of maturing loans in CMBS held at or above 85% for the third-consecutive month, slipping to 87.5% from 90.0% in June, and the year-to-date maturity payoff rate is at 80.9%. Morningstar wrote in its report that it anticipates the maturity payoff rate will finish the year between 80% and 85% because most of the remaining maturing loans have strong metrics.
- After touching a post-crisis low of $17.34 billion in November 2017, the balance of loans on the Morningstar Watchlist reached a 13-month high of $25.23 billion in July, up $816.7 million from June, driven by declining performance among office and multifamily properties.
- After falling for nine consecutive months, the special-servicing unpaid principal balance rose to $20.80 billion, up $224.4 million from June, and the percentage of loans in special servicing inched up 3 basis points to 2.52%.
- Projected losses on specially-serviced loans have held constant, edging up to $12.42 billion, an increase of $33.5 million from June, but down $14 million from January.
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