Multifamily suffers nationally as CMBS delinquencies are on the rise.

WEEKLY MARKET COMMENTARY - AS OF JUNE 7, 2010

HISTORICAL CMBS DELINQUENCIES CONTINUE - Delinquencies in commercial mortgage-backed securities continued at historical highs in May, up 40 basis points to 8.42 percent, said Trepp LLC, New York.

Trepp recorded 8.02 percent in CMBS delinquencies in April for CMBS loans more than 30 days delinquent. The firm said the overall delinquency rate would be nearly 9 percent “if defeased loans were taken out of the equation.”

Seriously delinquent loans—more than 60 days in foreclosure, real estate owned (REO) or non-performing balloons—were up 41 basis points to 7.55 percent.

Fitch Ratings, New York, said average loss severities for its U.S. CMBS rated universe will continue to exceed historical averages through the end of 2011.

In Fitch's U.S. CMBS Loss Study, the ratings agency said it expects higher loss severities for all property types this year. Annual loss severities by property type last year were at 58 percent for multifamily; 48.2 percent for retail; office at 56.9 percent; industrial at 48.8 percent and hotels at nearly 82 percent.

In its monthly delinquency report, Trepp said multifamily had the highest delinquency rate among major property types, up 28 bps to 13.34 percent, and lodging—hotel delinquencies—jumped nearly 130 bps to 18.45 percent. Office delinquencies approached 6 percent—now at 5.81 percent—after up 44 bps from April, and retail CMBS delinquencies increased 42 bps to more than 6.86 percent. Only industrial properties posted a delinquency rate decline among major property types.

Fitch said its overall view of the CMBS sector remains negative, and maturations for 10-year fixed rate 2005 to 2007 vintages are fewer than five years away.

Fitch's 2009 losses were primarily in the 1998 vintage, led by the hotel sector, and the 2006 vintage, dominated by multifamily losses.

Fitch reported underperforming properties in states with weak economies, which led to an increase in rated U.S. CMBS delinquencies for April to 7.48 percent.

Brad Cox, CCIM, CPM
Senior Vice President - Debt Placement
Thomas D Wood and Company
Email: bcox@tdwood.com