Commercial Mortgage-Backed Securities (CMBS) Delinquencies Continue to Rise, Alarming Investors
by Joe Killinger
The Commercial Mortgage-Backed Securities (CMBS) delinquency rate began its ascent as loans from 2006 and 2007 started reaching their maturity dates starting around March of 2016 and has held a steady increase since. The current delinquency rate for US commercial real estate loans in CMBS is now 4.98%, which is an increase of 20 basis points from September so it has moved up rather quickly.
As we move into the holidays and into 2017 we should see the a continuation of the same as we are finding that the ability to refinance the commercial loans is quickly becoming more difficult since the underwriting has tightened as well as rising interest rates. The combination of tightened underwriting along with the rate changes will affect cash flows for those that previously had a loan with a lower rate and higher debt ratios which could lead to the banks needing to consider further options. Additionally, as defaults rise the amount of debt available for a bank to loan decreases, further compounding the issue.
Keep your eyes on the CMBS market as it can be a good indicator for the real estate market but know that there could be some great acquisition opportunities in the coming months.