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CMBS Delinquencies Fall Again; More Loans Pay Off
Tucker, Michael
The commercial mortgage-backed securities delinquency rate declined again in September and the payoff rate has improved in each of the last three months, reported Fitch Ratings and Wells Fargo Securities.

Fitch Ratings, New York, reported that CMBS late-pays fell two basis points last month to 8.37 percent.

"The drop in delinquencies marks the fourth straight month of improvements in the overall rate," said Mary MacNeill, managing director with Fitch.

MacNeill said delinquency rates "moved predictably across all major property types" last month. The hotel and multifamily rates continued improving, while the office and retail rates modestly worsened, and the largest additions to Fitch's delinquency index came from these two sectors.

"The industrial rate remained somewhat volatile," MacNeill said. "However, that is largely attributable to industrial’s smaller denominator and tendency toward lumpier portfolio loans."

Fitch reported that the hotel sector had a 10.24 percent delinquency rate in September, down from 10.82 percent in August. The multifamily delinquency rate fell to 9.95 percent from 10.18 percent, while industrial's delinquency rate rose to 9.03 percent. The office delinquency rate increased nine basis points to 8.83 percent while retail's rate rose five basis points to 7.48 percent.

Marielle Jan de Beur, senior analyst with Wells Fargo Securities, New York, said 2012 "has been a challenging year for maturities, but we are starting to see an improvement in the payoff rate as the amount of five-year loans from the 2007 vintage begins to taper off."

Jan de Beur said only 54.4 percent of maturing loans have paid off on time so far in 2012, down from 2011's payoff rate of 63.7 percent. But the payoff rate has improved in each of the last three months, with the August rate reaching 71.4 percent, the highest level since April 2011.

"Maturity defaults even on quality assets are still taking place, suggesting that borrowers may be lacking the proper motivation to secure new financing sooner, often resulting in fees to the trust," Jan de Beur said.

Fitch Ratings maintains a "stable" outlook on approximately 84 percent of its U.S. CMBS portfolio by balance. It considers 9 percent "distressed" and gives a negative outlook to 6 percent.