US CMBS delinquency rate drops sharply

The US CMBS delinquency rate dropped 17 basis points to 5.40% in May, the biggest drop since November 2014, according to Trepp.

The sharp drop came after the rate hovered within a 23 bps band, from 5.66% to 5.57%, from the start of the year through April, when it looked like significant improvements might be behind the market.

In May, $1.2bn in loans became newly delinquent, putting 23 bps of upward pressure on the rate; but $700m in loans were cured, helping push delinquencies down by 13 bps.

CMBS loans that were previously delinquent but paid off either at par or with a loss totaled more than $1.2bn, and removing these previously distressed assets moved the rate down an additional 24 bps.

There are currently $28.7bn in delinquent loans, excluding loans that are past their balloon date but are current on their interest payments.

The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or non-performing balloons) is now 5.23%, 21 basis points lower from the previous month. (5.69% not counting defeased loans, which is down 21 bps).

In the last 25 months, the delinquency rate has fallen 22 times and is now 87 bps lower than the year-ago level. One year ago, the rate was 6.27%; six months ago it was 5.80%. The rate of loans seriously delinquent one year ago was 6.05%; and 5.66% six months ago.

Lodging remains the best performing major property type, improving 38 bps to 3.80%. Multifamily loans remain the worst performing but the delinquency rate still dropped 30 bps to 8.62%.