The delinquent unpaid balance for commercial mortgage-backed securities (CMBS) decreased by $1.65 billion in February, reflecting a fourth consecutive monthly decline, according to new data from Morningstar Credit Ratings LLC. The delinquent unpaid balance for CMBS had previously decreased by $58.1 million in January, $727.7 million in December 2011 and $1.37 billion in November 2011.
The total unpaid balance for CMBS available for review for the February remittance period decreased to $718.35 billion from $720.18 billion a month prior. The resultant delinquency ratio for February of 8% is down from 8.21% a month prior, and down from the 8.28% reported one-year prior in February 2011. However, Morningstar notes that this ratio remains over 28 times its recorded low point of 0.283% in June 2007.
‘The movement in both delinquent unpaid balance and percentage continues to be impacted by the size and amount of loan liquidations, modifications, extensions and resolutions reported on a monthly basis, along with new balloon maturity defaults,’ says Morningstar. ‘These items, as a whole, should lead to continued volatility in the reporting of new delinquency levels for the remainder of 2012.’
Morningstar also predicts that the ‘delinquent unpaid balance for CMBS still has the potential to reach nine percent at some point in 2012. This remains a reality under more heavily stressed scenarios involving additional large loan defaults driven by several of these high risk-loans identified on the Morningstar Watchlist from more recent vintage transactions, which continue to show signs of stress and default risk, along with continued/expected balloon maturity defaults where refinancing is not readily available. If the credit markets do not recover sufficiently to handle the upcoming balloon maturity risk in existing CMBS, or additional distressed loans already on the Morningstar Watchlist experience default, we could easily reach this level.’