DBRS Morningstar CMBS Monthly Highlights—October Remittance: Delinquency Rate Ticks Down; Special Servicing Rate Nudges Higher for Third Consecutive Month
The delinquency rate for loans packaged in commercial mortgage-backed securities (CMBS) eked out a small improvement for October, declining 2 basis points (bps) to 2.90%. The delinquency rate has declined more than 7 percentage points from its pandemic high. While property fundamentals have held up reasonably well, we expect to see the rate of contraction to continue to decelerate amid a challenging macroeconomic backdrop.The special servicing rate increased for the third month in a row, rising 9 bps to 5.26%, on the back of rising retail and office distressed assets, while distressed property sales rose in October as liquidation activity grew to around $340 million from roughly $212 million, while the weighted-average loss severity climbed to 45.5% from below 40%.
The October maturity payoff rate continues to underperform, rising just 40 bps to 42.3%, as lending activity is tepid except for prime assets. Because of this, DBRS Morningstar doesn't expect much movement through year end in the year-to-date (YTD) maturity payoff rate, which stands at 59.1%.
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