Commercial mortgage delinquency up 585%

Commercial mortgage delinquency up 585%
Denver Business Journal - by Silicon Valley / San Jose Business Journal

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 with the highest amount of delinquent loans, closely followed by Texas and Florida.

The jump in late loans across the country is up an “astounding” 585 percent from a year ago when just $4 billion were delinquent, reported the Horsham, Penn.-based research firm. The low point for delinquency was March 2007 when $2 billion was 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 slightly 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 across the state, compared to Texas where the problems are located 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 metro areas, Phoenix has the highest at $1 billion and San Francisco has the lowest at $605 million.

Not all late loans were declared delinquent, as $105 billion worth of loans were either liquidated or handled through workouts. Of those 26 loans, 10 experienced a loss of only 1 percent, while the others experienced an average loss of almost 64 percent.

According to the Oakland, Calif.-based Foresight Analytics LLC, which tracks delinquencies on a quarterly basis in residential mortgages, construction loans and commercial loans, delinquency rates on commercial mortgages rose in the second quarter to 4.5 percent from 3.6 percent in the first quarter. That figure is more than double the first quarter rate of almost 2 percent 2008.

“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 in Foresight Analytic

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