Defusing once what once seen as a ticking time bomb for the nation's financial markets, nearly $119.5 billion, or 8%, of the outstanding balance of commercial and multifamily mortgages held by non-bank lenders and investors will mature in 2013, a 21% decline from the $150.6 billion that matured in 2012, according to the Mortgage Bankers Association.
The loan maturities vary significantly by investor group. Just 5% ($16 billion) of the outstanding balance of multifamily and health care mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2013. Life insurance companies will see 7% ($21.9 billion) of their outstanding mortgage balances mature in 2013. Among loans held in CMBS, 7% ($43.4 billion) will come due in 2013. A larger percentage, 21% ($38.1 billion) of commercial mortgages held by credit companies and other investors, will mature in 2013.
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“During the recession, and even in more recent years, approaching commercial and multifamily mortgage maturity volumes were referred to as akin to a ‘ticking time-bomb’ that would overwhelm the real estate finance markets,” said Jamie Woodwell, MBA’s vice president of commercial real estate
research. “The volume of loans maturing in 2013 and 2014 will mark cycle lows for loan maturities, each representing less than 8% of the outstanding balance of loans," he added.
Driving home his point, Woodwell stated, "In reality, the relatively long-term nature of commercial and multifamily mortgage debt helped the market weather the recession and its slow recovery.”
Non-Defaulted Loans Should Refinance Readily in 2013
Of $20 billion in maturing non-defaulted CMBS loans that reported financial data as of year-end 2011, 92% would be able to refinance this year, according to Fitch Ratings estimates.
Fitch Ratings assumed a current market interest rate of 5% and a 30-year amortization schedule.
It is worth noting, however, that the total universe of Fitch-rated CMBS loans outstanding with scheduled maturities in 2013 is twice that volume at 2,900 loans totaling $40 billion. Of those loans, approximately $15 billion (almost 40%) are defaulted and $4 billion (approximately 10%) are defeased.
Under its stressed refinance parameters, Fitch Ratings refinance percentage would drop to 70%.
The breakdown by property type of performing loans with 2013 maturities is as follows:
* Office: $9.6 billion (49%)
* Retail: $4.4 billion (18%)
* Hotel: $2.3 billion (9%)
* Multifamily: $2.1 billion (8%)
* Other: $2.1 billion (8%)
* Industrial: $804 million (3%)
CMBS Loan Delinquencies Slow To Lowest Level Since 2008
January saw the fewest number of newly delinquent CMBS loans since October 2008, according to Wells Fargo Securities.
Of the core property types, only retail experienced an increase in the percentage of delinquent loans in January. The 30+ day delinquency rate for retail loans rose 13 basis points in January to 7.34%, while the office sector fell 30 bps to 9.86%. The multifamily 30+ day delinquency rate dropped 70 bps to 12.66% In January. The 30+ day delinquency rate has improved considerably in January for hotel loans as well, declining 50 bps to 10.10%.
The balance of loans in special servicing also is falling, according to Fitch Ratings. At the end of 2012 there was $70.5 billion in loans in special servicing compared to $83.1 billion at year-end 2011.
This decline is due in part to the large volume of resolutions ($47.1 billion) during 2012 and the relatively low volume of transfers into special servicing. Transfers into special servicing for 2012 amounted to $49.9 billion compared to $82.5 billion in 2011, Fitch Ratings reported.
Since the second quarter of 2010 when the volume of loans in special servicing peaked at $90 billion, the most active special servicers have been working out more than 11,000 loans, approximately $166 billion.
LNR Partners Inc., CIII Asset Management and CW Capital Asset Management continue to dominate the market by volume and number of specially serviced loans. All have resolved more than half of their total loans in special serving during this time period, although dispositions methods vary.
Liquidations from CW and CIII represent 71% and 74% of their respective workouts, whereas LNR has liquidated 83%. The resolutions that are not liquidations are loans returned to the master servicer, usually through modification.
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