As we approach the first Federal Reserve induced interest rate increase in about nine years, the impact on CMBS down the road will definitely bear watching!
Given the way that the underwriting of commercial mortgage loans is done and the impact that an increase in rates might have on borrower credit quality, debt service coverage ratios (DSCR), cap rates and property valuations, the refinancing of current loans and mortgage availability for new purchases might at some point become somewhat problematical.
But given the data from Trepp concerning the current delinquency trends in the CMBS marketplace, an unhealthy mortgage environment is most definitely not the case now.
• The overall US CMBS delinquency rate improved 10 basis points to 5.13%.
• The percentage of loans seriously delinquent (60+ days delinquent, in foreclosure, REO, or nonperforming balloons) is now 5.02%, eight basis points lower for the month.
• If defeased loans were taken out of the equation, the overall 30-day delinquency rate would be 5.41%—down 11 basis points.
• There are currently $26.4 billion in delinquent loans. This number excludes loans past their balloon date but current on interest payments.