Commercial mortgage delinquency rises 585 percent
Houston Business Journal
Monday, July 27, 2009
Delinquencies on commercial mortgage-backed securities soared $10 billion in June, hitting a 12-month high of almost $29 billion, according to Realpoint Research.
California led the nation in delinquent loans, closely followed by Texas and Florida.
The jump in late loans throughout the country is up an “astounding” 585 percent from a year ago, when $4 billion in loans were delinquent, according to the research firm, based in Horsham, Penn. The low point for delinquency was March 2007, when $2 billion in loans were delinquent.
Realpoint reported that the total unpaid balance for all commercial-backed mortgage securities pools under review by the firm was $817 billion in June, down from $825 billion in May as a result of a delay in reporting some deals.
The three states with the most delinquent loans accounted for more than a quarter of the unpaid balances. Realpoint said California, with almost $3 billion in delinquent loans, or 10 percent of the exposure, and Texas, with $2.5 billion, or 9 percent of all delinquencies, “remain a major concern.” In California, the delinquent properties are spread throughout the state, compared with Texas, where the problems are mainly in Dallas-Fort Worth.
The other states among the top 10 are Michigan, Arizona, New York, Georgia, Hawaii, Nevada and Illinois. If delinquencies are counted by only metropolitan areas, Phoenix has the highest, at $1 billion, and San Francisco has the lowest, at $605 million.
Not all late loans were declared delinquent: $105 billion worth of loans were either liquidated or handled through workouts. Of those 26 loans, 10 experienced a loss of 1 percent, and the others experienced an average loss of almost 64 percent.
Delinquency rates on commercial mortgages rose in the second quarter to 4.5 percent from 3.6 percent in the first quarter and almost 2 percent in the first quarter of 2008, according to Foresight Analytics LLC, an Oakland, Calif., company that tracks delinquencies quarterly in residential mortgages, construction loans and commercial loans.
“The 4.5 percent delinquency rate is still well below the 8 percent rate in the third quarter 1991, but it is worrisome in light of an eroding economy, severely constrained credit availability and high volume of commercial mortgages coming due during 2009 and the next several years,” wrote Matt Anderson, a partner with Foresight Analytics.