NEW YORK – An apparent lull in the U.S. economic recovery has not proven to be a significant deterrent to the U.S. commercial mortgage-backed securities sector. According to the latest Fitch Ratings U.S. CMBS Loan Delinquency Index, the delinquency rate declined fourteen basis points from the second quarter rate and now stands at 1.42%.
‘A decline in delinquencies has been noted in all property types except office and industrial,’ said Mary O’Rourke, Senior Director, Fitch Ratings. ‘Overall, even with the addition of $25 million newly defaulted mixed use office/retail loans, delinquencies were down by more than $164 million. If unseasoned transactions are removed from the calculations, the new Index is 1.68%. At last reporting, the seasoned Index was 1.84%.’
While the very slow growth in job creation in the office-using sector and ongoing problems in the manufacturing sector accounted for increased defaults in office loans (2.5%) and industrial loans (6.4%), both the hotel and health care sectors showed continued improvement, with delinquencies declining slightly in both property types. ‘Both of those sectors have had histories of high delinquencies, so it is encouraging, particularly within the hotel sector, to see continuing improvement,’ said O’Rourke.
Although delinquencies in retail loans declined, ‘at less than 1%, the improvement was not material,’ said O’Rourke. ‘Reports released at the end of August point out reduced retail earnings. The decline in earnings, coupled with the negative impact higher gasoline prices and higher interest rates are likely to have on consumer spending, is an indication that the retail sector remains vulnerable to further deterioration.’
Previously published quarterly, Fitch’s CMBS Loan Delinquency Index will soon be updated monthly. For more information on the Fitch Loan Delinquency Index, visit the Fitch Ratings web site at www.fitchratings.com.
