DBRS Morningstar CMBS Monthly Highlights— December Remittance: Delinquency and Special Servicing Rates Dip, Full Year Maturity Payoff Rate Finishes Below 60%
• The delinquency rate for loans packaged in commercial mortgage-backed securities (CMBS) improved to 2.81% from 2.89% in November.• Although December's overall delinquency rate tumbled far below the Coronavirus Disease (COVID-19) pandemic-era high of 10.17% and is much closer to the pre-pandemic low of 1.24% achieved in November 2019, the delinquency rate is likely to reach an inflection point as more loans are transferred to special servicing, particularly as loans mature and have to refinance at significantly higher rates and tighter lending standards.
• Compared with year-ago levels, the hotel sector saw the largest percentage decline in delinquency rate, falling 3.73 percentage points, followed by retail with a decline of 1.08 percentage points.
• The special servicing rate improved for the first time since July, declining 8 basis points (bps) to 5.47%, as hotel performance continues to improve, falling nearly 50 bps from November.
• Distressed property sales declined to the lowest level in nearly two years, falling to $181.5 million from $262.9 million, while the weighted-average loss severity spiked to 72.5% from less than 20% in November primarily because of a 100% loss on a large Puerto Rico retail loan.
• The maturity payoff rate for the year clocked in at less than 60% for the third straight year because of higher interest rates and a slowing U.S. economy. Our 2023 outlook for the maturity payoff rate isn't much changed at roughly 60% because of persistent headwinds that will continue to challenge refinancing maturing loans.
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