CMBS debt relief inquiries fall in late April, but worst is yet to come, new report says

About 26% of all CMBS borrowers have contacted servicers since crisis began

(Credit: iStock)
(Credit: iStock)

After facing a tidal wave of relief requests in the first half of April, loan servicers saw a dip in inquiries during the last two weeks of the month. But that probably won’t last.

Over the two-week period ending April 26, the four largest commercial mortgage-backed securities master servicers (Wells Fargo, Midland, Keybank and Berkadia) received a total of 1,301 inquiries, less than half the prior two-week period’s total of 2,824, according to a new Fitch Ratings report. The total size of the loans involved declined only slightly, to $48.5 billion from $51.5 billion.

“This is not a positive indicator, but likely the calm before the storm as higher delinquencies and more relief requests come in May,” Fitch U.S. CMBS senior director Adam Fox said in a statement.

The decline in inquiries appears to be due to “month-end timing and final April rent collections and debt service payments,” the report says, noting that servicers expect more delinquencies this month.

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In the multifamily sector, for example, early predictions of a massive rent shortfall turned out to be overblown as 89 percent of tenants made payments in April — though many landlords expect May to be worse.

Over the same period as the decline in inquiries, however, the number of loans transferred to special servicing rose to 218 from 113, or to $8.4 billion from $5.7 billion. However, the report notes that not all of these loans are necessarily in default. In May, Fitch “expects special servicing transfers to increase as loan defaults increase and more complex modifications are needed.”

Nearly 26 percent of all CMBS borrowers have contacted their servicers since Fitch began collecting data on the pandemic, the report notes. Meanwhile, 3 percent have been transferred to special servicing.

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