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Coronavirus Sparks Billions in U.S. CMBS Delinquencies

May 21, 2020, 09:10 AM
Filed Under: Industry News
Related: CMBS, Fitch Ratings

New loan delinquencies and new loan transfers to special servicing within the Fitch-rated U.S. CMBS conduit universe increased substantially in May due to coronavirus. The majority of conduit remittances for May have now been reported and 30-day loan delinquencies increased exponentially, rising 12 times as much as April. This is consistent with Fitch's expectation the delinquency rate will increase over the next few months and peak between 8.25% and 8.75% by the end of third quarter 2020.

Based on 96% of the Fitch-rated U.S. CMBS conduit universe reporting for May, an additional $924 million, or 49 loans, were added to Fitch's delinquency index as 60 days delinquent. These delinquencies are expected to contribute nearly 20 basis points (bps) to Fitch's overall delinquency rate, which was 1.32% in April with $1.0 billion reported as 30 day delinquent.

Additionally, approximately $13.5 billion, or 733 loans, were newly categorized as 30 days delinquent in May; nearly 78% by balance were hotel and retail loans. Assuming the same 89% roll rate of 30-day delinquencies becoming 60 days that occurred from April to May, the overall delinquency rate next month could increase an additional 250 bps.

Fitch's delinquency index includes loans that are currently at least 60 days delinquent, in foreclosure or REO, or considered non-performing matured balloons. After factoring in resolutions and runoff within the portfolio in May, overall conduit delinquencies increased by approximately 10% to $6.7 billion from $6.1 billion in April.

By property type, the new conduit loan delinquencies for 60+ days and 30+ days in May are:

  • Retail: $401 million (17 loans); $4.6 billion (239 loans);
  • Hotel: $220 million (18 loans); $6 billion (345 loans);
  • Office: $180 million (five loans); $646 million (31 loans);
  • Mixed Use: $69 million (three loans); $1.5 billion (57 loans);
  • Industrial: $24 million (two loans); $66 million (nine loans);
  • Multifamily: $8 million (two loans); $785 million (46 loans);
  • Other: $22 million (two loans); $50 million (six loans).

Based upon May reporting to date, an additional $3.3 billion, or 162 loans, were newly transferred to special servicing; 88% of these new transfers were hotel and retail loans. Overall, approximately $13 billion of the Fitch-rated conduit universe was in special servicing, up 27% from $10.2 billion in April. Of the $13 billion currently in special servicing, nearly two-thirds ($8.7 billion) was reportedly at least 30+ days delinquent.

By property type, the new loan transfers to special servicing include:

  • Retail: $1.7 billion (61 loans); 51% of new special servicing loan transfers in May;
  • Hotel: $1.2 billion (82 loans); 37%;
  • Mixed Use: $273 million (eight loans); 8%;
  • Office: $101 million (seven loans); 3%;
  • Multifamily: $13 million (two loans); less than 1%;
  • Other: $6 million (two loans); less than 1%.

Of the $1.8 billion in new retail loans transferring to special servicing in May, over 65% ($1.1 billion, 13 loans) are backed by regional malls. The majority transferred ahead of their scheduled loan maturities and/or the borrower has requested coronavirus relief.

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