Friday, November 5, 2010

Turning a Corner: Commercial Mortgage Delinquencies Fall Via Resolutions

Bloomberg News

Nov. 5 (Bloomberg) -- Late payments on U.S. commercial property mortgages bundled and sold as bonds declined in October for the first time in three years as seven loans were resolved, Fitch Ratings said.


The delinquency rate fell 88 basis points from a month earlier, or 0.88 percentage point, to 7.78 percent, Fitch said today in an e-mailed statement.

The drop came mostly from the resolution of seven loans of more than $100 million, including $4.1 billion from Extended Stay America Inc., the hotel operator that emerged from bankruptcy last month. An expected rise in delinquencies over the next two years may be counterbalanced at times by large-loan resolutions, said Harris Trifon, a Deutsche Bank analyst in New York.

“It’s going to be more volatile, much more so than what it’s been,” Trifon said in a telephone interview. Loans that are considered resolved include those where the borrowers resume paying, the debt is paid off or terms are adjusted.

Hotel delinquencies fell to 14.1 percent from 21.3 percent, the biggest decline on record for any commercial mortgage-bond sector, Fitch said.

“Hotel loans are now the most well-positioned to recover quickly when business and consumer spending resume and the economic recovery gains traction,” Mary MacNeill, a managing director at Fitch in New York, said in the statement.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net