Is this the Calm Before the Storm for U.S. CMBS Delinquencies?

Although CMBS delinquencies declined slightly in October, next month’s levels will likely feel the effects of hurricane-related delinquencies, according to Fitch Ratings.

Fitch’s loan delinquency index declined two basis points to 0.93% in October and 34 basis points since January 2005′s rate of 1.27%. Though according to Fitch Senior Director Patty Bach, “Servicer advances on hurricane-affected properties have been on the rise since September, so the repercussions of Hurricane Katrina, Rita and Wilma are likely to be reflected in Fitch’s November data.”

Fitch’s delinquent loan index includes loans 60 or more days delinquent. A loan reported 60-days delinquent in October has a paid-to-date of July, therefore if payments ceased immediately after Hurricane Katrina, a loan would first appear as 60-days delinquent in November (with a paid to date of August).

By property type, multifamily properties represent 31.3% by balance of Fitch’s delinquent index, followed by office properties at 18.9%, retail properties at 15.5% and hotel properties at 14.7%. While multifamily and office delinquencies rose dramatically over the first half of the year, third quarter showed some improvement. Retail and hotel property delinquencies have declined for most of 2005.

By delinquent category, currently 57.1% of the loan delinquency index is comprised of loans in foreclosure and REO, representing 13.8% and 43.3% of the index by balance, respectively. The two largest loans liquidated in October were a $25 million airport parking facility located in Saint Louis, MO and a $17.2 million office property located in Salt Lake City, UT, reported Bach.

Overall, the seasoned delinquency index dropped eight basis points this month to 1.19% from 1.27% in September and 38 basis points from 1.57% in January 2005. The seasoned index omits transactions with less than one year of seasoning.