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SF Credit Brief: CMBS Delinquency Continues To Decline As The U.S. Economy Reopens


European CMBS Monitor Q2 2021


Non-Qualified Mortgage Summer Snapshot

Take Notes - Directive Issued To Harmonize EU Covered Bonds


RMAC No. 2’s Class B And C U.K. RMBS Notes Upgraded; Class A And D Notes Affirmed

SF Credit Brief: CMBS Delinquency Continues To Decline As The U.S. Economy Reopens


Delinquency And Forbearance Both Declined

The U.S. commercial mortgage-backed securities (CMBS) delinquency (DQ) rate continued to fall in May, while the forbearance rate declined slightly. The overall DQ rate for U.S. CMBS transactions decreased 41 basis points (bps) month over month to 5.3% in May 2021 (see chart 1). By dollar amount, total DQs decreased by a net $2.1 billion month over month and decreased $3.2 billion year over year to $33.5 billion.

The overall DQ rate decreased 89 bps to 5.3% in May 2021 from 6.2% a year earlier continuing the decline from the 9.0% peak reached in June 2020 (see chart 2).

Chart 1


Chart 2


Forbearance decreased 12 bps to 7.3% in May--a minor decline from the 8.0% peak reached in July and August 2020 (see chart 3). The forbearance rate reflects all watchlist loans, which comprise almost equal proportions of the loans already in forbearance and the loans requesting forbearance. Of the loans that were in forbearance as of March 2021, 4.3% are now performing, while 0.8% became delinquent.

The lodging and retail sectors continued to represent the largest proportion of loans in forbearance and loans currently requesting forbearance relief due to the COVID-19 pandemic, at 62.3% ($28.8 billion) and 26.8% ($12.4 billion), respectively (see chart 4).

Chart 3


Chart 4


Seriously Delinquent Loan Levels Still High

The share of delinquent loans that are 60-plus-days delinquent (i.e., seriously delinquent) was 89.0% as May (see chart 5). Further, loans that are 120-plus-days delinquent (those reported in the CRE Financial Council investor reporting package with a loan code status of '6') continued to represent the largest portion of delinquent loans, at 39.7%. The outstanding balance of $14.8 billion is much higher than the pre-pandemic levels. As of July 2020, 120-plus-days delinquent loans comprised less than 5.0% of all delinquencies (see chart 6).

Chart 5


Chart 6


Special Servicing Declined 43 Bps

The overall special servicing rate declined 43 bps month over month to 7.5% in May (see chart 7). The special servicing rate peaked at 9.5% in September 2020, but it has been declining since then. The retail sector special servicing rate also declined 26 bps month over month to 15.1% in May.

In-grace loans increased 40 bps to 2.6% of overall outstanding balance, totaling $16.6 billion in May. This is in line with the pre-pandemic levels observed at the start of 2020. However, the grace-to-DQ conversion rate (i.e., the proportion of outstanding balance that moved from in-grace into DQ month over month) remained elevated at 7.0%, compared with the 2.4% reported in March 2020. Newly in-grace loans totaled $11.1 billion in May.

By balance, delinquency rates decreased for lodging (138 bps), multifamily (28 bps), retail (28 bps), and office (4 bps), while industrial increased (2 bps) (see chart 8).

Chart 7


Chart 8


Newly Delinquent Loans Totaled $2 Billion In May

There were 81 newly delinquent loans totaling $2 billion in May. These included 24 retail loans ($1.1 billion), 22 lodging loans ($300.0 million), 15 office loans ($224.8 million), three multifamily loans ($19.5 million), and two industrial loans ($21.4 million).

The property type composition of delinquent loans changes year over year (see charts 9 and 10). Retail has experienced the most significant increase in DQ rate composition with DQ rising to 40.1% in May from 35.1% a year earlier.

Chart 9


Chart 10


S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the world. Widespread immunization, which will help pave the way for a return to more normal levels of social and economic activity, looks to be achievable by most developed economies by the end of the third quarter. However, some emerging markets may only be able to achieve widespread immunization by year-end or later. We use these assumptions about vaccine timing in assessing the economic and credit implications associated with the pandemic (see our research here: As the situation evolves, we will update our assumptions and estimates accordingly.

The authors would like to thank Bushra Dawawala for her research contributions to this report.

This report does not constitute a rating action.

Primary Credit Analyst:Ambika Garg, Chicago + 1 (312) 233 7034;
Secondary Contacts:Tamara A Hoffman, New York + 1 (212) 438 3365;
Senay Dawit, New York + 1 (212) 438 0132;
Deegant R Pandya, New York + 1 (212) 438 1289;
Research Contacts:James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028;

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