The delinquency rate for U.S. commercial mortgage-backed securities fell in March — but that is likely to change, according to a new report.
Last month delinquencies dipped four basis points to 1.31 percent from the month before, largely because of new loan issuance and minimal new delinquencies, Fitch Ratings said Friday. So far for the year, delinquencies also are down overall.
But the ratings agency warned that the coronavirus pandemic likely will cause the delinquency rate for loans attached to commercial properties will rise, with hotel and retail properties hit hardest. (Fitch said its projection will be released next week.)
There are already signs that commercial borrowers may be facing trouble. Over 2,600 borrowers have asked the four largest servicers of CMBS and Freddie Mac deals for some form of debt relief, ranging from payment forbearance to default waivers, Fitch previously found. Borrowers against properties secured by hotels and retailers again were among those asking for the most assistance.
In its latest findings, Fitch said that loans secured by only two property types recorded slight increases in March from the month before: mixed-use, with a delinquency rate that rose 1 basis point to 0.86 percent, and “other,” which rose 2 basis points to 0.68 percent.
Meanwhile, the largest new delinquency in March stemmed from a $57.4 million portfolio loan secured by nine triple-net retail properties in New York and Connecticut. The properties are mostly leased to top tenants like CVS Pharmacy and TD Bank, Fitch said, but the deal went to special servicing in December for defaults on payment and cash management issues.
Fitch also found that among loan types, small balance transactions, representing $78.9 million, notched the highest delinquency rate in March of 2.04 percent. But that rate was unchanged from February, according to Fitch. Single-asset, single-borrower deals saw no delinquencies in March.
The only category that saw a rise in delinquencies was single-family rental transactions, representing $1.7 billion worth of loans, with a delinquency rate of 1.62 percent in March. That was up from 1.44 percent in February.
Write to Mary Diduch at [email protected]