The Trepp CMBS delinquency rate continued its downtrend in August after posting the largest decline in four years in July. The overall CMBS delinquency rate in August was 9.02%, a decline of 58 basis points from July. About $6.5 billion in loans were “cured” in August, helping the rate post another sizable decline.
By “cure,” Trepp means that the loan was delinquent in July, but reverted to current (or in or beyond grace period) status in August. Some of these cures came as a result of forbearances being granted and borrowers being authorized to use reserves to make the loan current. In other cases, relief was canceled or withdrawn by the borrowers and the loans were brought current without relief.
About 1.21% of the overall number represents loans in the 30-days-delinquent bucket, while another 1.04% is now 60 days delinquent. Both numbers were sizable improvements from July. However, the percentage of loans that are 90 or more days delinquent rose to 4.02% in August from 2.65% in July.
Earlier this summer, Trepp noted that the delinquency rate could be reaching “terminal delinquency velocity” – which reflected the belief that most borrowers that felt the need for debt-service relief have already requested it. In other words, if a borrower did not need relief between April and June, the borrower likely will not need it, although maturity defaults could still be an issue.
The delinquency numbers over the last two months have done even better. However, with relief windows ending for some loans and new parts of the country being hit with the virus for the first time over the last 60 days, an uptick in delinquencies in the future is possible. Going forward, we believe future increases in the delinquency rate will be more modest than what we saw during the height of the coronavirus crisis.