Delinquencies among U.S. commercial mortgage-backed securities (CMBS) continued to slide in December and an unlikely source was largely responsible for the decline. According to Fitch Ratings’ U.S. CMBS loan delinquency index, hotel delinquencies dropped sharply during the month thanks to an $86 million loan collateralized by a New Orleans hotel property.
“Delinquencies in all property types remained relatively stable with the exception of hotels,” says Fitch Ratings’ Senior Director Britt Johnson. “Hotel delinquencies fell to 8.1%, or by $86 million, as of December from 12.9% in November.”
The New Orleans hotel loan was transferred to the special servicer last September due to payment default. The special servicer typically gets involved when a loan has formally become distressed. The situation improved in December when the loan was brought current on principal and interest payments. Fitch reports that the loan remains with the special servicer under a short term forbearance agreement.
“Although the loan is now current, given the uncertainty regarding the recovery of the New Orleans market, payments of debt service obligations could be an issue in the future,” adds Johnson.
In December, CMBS delinquencies dropped to 0.42%. One basis point of the delinquency rate decline is attributable to the addition of three new totaling $9.2 billion to Fitch’s deal universe. The delinquency index increases when the balance of newly 60-day delinquent loans exceeds the balance of loans that drop out of the index because they are no longer 60-days delinquent, are paid off, defeased, or liquidated.