By Tyler Durden | 5 May 2020
ZERO HEDGE — Last week we reported that according to the latest TREPP remittance data compiled by Morgan Stanley, a record 66 CMBS loans totaling $1.0bn became newly delinquent in April, which was the greatest month-over-month change on record. In total, 324 loans with a total balance of $4.8bn are currently delinquent, which is also an all time high.
What was more troubling than the plain vanilla surge in delinquencies, is the coming deluge of defaults. Recall that a CMBS loan becomes delinquent after it misses two consecutive payments. Loans that have missed just one month of interest are classified as “late but within grace period” or “late beyond grace period”. It is this measure that spiked a record 600bp MoM to ~8.5%.
Yet it now appears that this data was not only somewhat stale but also dramatically underestimated the full severity of the commercial real state catastrophe over the last weeks of April, because according to Fitch data, borrowers with mortgages representing almost $150 billion in CMBS, accounting for 26% of the outstanding debt, have asked about suspending payments in recent weeks – an unprecedented surge in requests for payment relief on CMBS, and an early sign of the severity of the pandemic-induced real estate crisis. Putting this number in context, after the last financial crisis, delinquencies and foreclosures on the debt peaked at 9% in July 2011. So here we are, barely a month into the corona crisis, and the number is already three times greater! […]