January CMBS remittance data showed a 24bp uptick in late payments, a 1bp increase in 60 day plus delinquent loans and a 12bp increase in forborne loans. This type of short-term remittance data can be volatile, but frequently provides early warnings on emerging trends. Exhibit 1 shows the 24bp late payment increase to 1.6%, which may just indicate Omicron was having an impact on CMBS as it emerged in late December and early January. Given that vaccinations are allowing many businesses to once again resume business activities, this is hopefully just an initial Omicron blip that will not progress to 30 day delinquency in the February remittance data.

Exhibit 1: CMBS Late Payments Tick Up in January Remittances (Click Image to View Large Version)

Source: Moody's Analytics CMBS Loan Data

Nevertheless, January remittance data showed 60 day+ delinquency got 1bp worse to be 2.67%, and forbearance increased 12bp to 5.85%. Exhibit 2 shows the previous downward trend in delinquency and how forborne loans continue to increase. This flattening of the delinquency curve combined with the forbearance increase causes our troubled loan count to increase from 8.40% to 8.52%. This January delinquency flattening is the first pullback we have seen in the COVID-19 recovery and could be suggesting conditions have stabilized as far as they can for now. To gain further insights, we review what is happening with specific troubled loans.  

Exhibit 2: 60+ Day Delinquent Loans and Forborne Loans, as of Jan 31, 2022 (Click Image to View Large Version)

Source: Moody’s Analytics CMBS Loan Data

The first thing we notice is that the number of loans receiving modifications increased in the January remittance data. Exhibit 3 tracks the monthly amounts of hotel and retail loans receiving modifications. These modifications should have helped decrease the delinquency rate.

Exhibit 3: December Modifications Increase to Create More Performing Loans (Click Image to View Large Version)

The three largest loans that received modifications in the latest remittance reports and are now performing include the Waterfront at Port Chester (a $133.5MM retail loan in Westchester, New York, in MSC 2015-MS1), the Hotel Eastlund (a $39.3MM loan in Portland, Oregon, in CSAIL 2017-C8), and the Aviation Mall (a $19.2MM loan in Queensbury, New York, in WFRBS 2011-C2). These $192MM in cured loans joined another $992 million that reported as cured in January remittances to increase the universe of loans that have cured since August 2020 to 1,126 loans totaling ~$20 billion. The $133.5MM Waterfront at Port Chester loan was cured with forbearance, so while it is no longer reported as delinquent, it helped increase the amount of loans we label as troubled back in Exhibit 2.

This ongoing modification activity and the halt in delinquency improvement suggests it is more important than ever to continue tracking the loans that have cured since August 2020 to see if they progressing to higher DSCRs or sliding back into delinquency. In Exhibit 4 we present the latest DSCR progression summary for the loans that have cured since the COVID-19 peak back in August 2020.

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Darrell Wheeler is a CMBS researcher for Moody's Analytics Structured Solutions group. He creates insights from their commercial real estate data and extensive loan performance database. Darrell has more than 20 years’ experience generating CMBS research, and has held positions across various financial institutions.

Brian Schoenfeld is an analyst on the Moody’s Analytics CMBS desk within the Structured Solutions group. Prior to this role, he attended Dartmouth College, where he majored in Mathematics.

David Salz leads the Moody’s Analytics CMBS desk within the Structured Content Solutions group, providing timely and insightful data analytics to CMBS and CRE professionals. Prior to his current role, he managed the ABS desk and worked on various CLO related projects.

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