After a dismal July delinquency reading, the CMBS market rebounded smartly in August, according to Trepp LLC. The delinquency rate for U.S. commercial real estate loans in CMBS fell 36 basis points in August to 9.52%. This is the second largest drop since the beginning of the credit crisis in 2008 and the third time the rate has dropped in the past four months.
The drop in CMBS delinquencies in August is good news for the market that took a drubbing in July.
The percentage of loans seriously delinquent (60+ days in foreclosure, REO, or non-performing balloons) is now 8.79%.
For August, the delinquency rate for industrial properties jumped 15 basis to 11.24%. All other major property types were flat or improved.
The hotel delinquency rate dropped 128 basis points to 13.76%
The office delinquency rate remained unchanged at 8.17%
The multifamily delinquency rate fell 50 basis points but remains worst major property type at 16.44%.
The retail delinquency rate dropped 47 basis points to 7.38% and remains the best performing major property type
Loan Resolutions
A little more than $1 billion in CMBS conduit loans were resolved with losses in August, as the rate of loan resolutions slowed for the second consecutive month, according to Trepp. Unfortunately, the average loss severity was up sharply from the July reading.
In total, 159 loans were liquidated in August. (That compares to 175 loans and $1.3 billion in face amount in July.) The losses on the August liquidations were about $505 million - representing an average loss severity of 49.9%. In July, the average loss severity was 40.2%.
The August loss severity average is well above the average loss severity of 42.2% over the last 20 months. The special servicers have been liquidating at a rate of about $1.01 billion per month over that time - so the liquidations this month are right at the average over the last 20 months.
Maturity Payoffs
The percentage of loans paying off on their balloon date barely budged last month.
In August, 39.5% of loans reaching their balloon date paid off. This was just a shade lower than July’s 39.6% reading. The August number was just above the 12 month rolling average of 39.2%, Trepp reported.
By loan count - as opposed to balance - only 43.1% of the loans paid off. This was down more than six points from July’s reading of 49.4%. On the basis of loan count, the 12 month rolling average is now 48.8%.
Prior to 2008, the payoff percentages were typically well north of 70%. Since the beginning of 2009, however, there have only been two months where more than half of the balance of the loans reaching their balloon date actually paid off.
The drop in CMBS delinquencies in August is good news for the market that took a drubbing in July.
The percentage of loans seriously delinquent (60+ days in foreclosure, REO, or non-performing balloons) is now 8.79%.
For August, the delinquency rate for industrial properties jumped 15 basis to 11.24%. All other major property types were flat or improved.
The hotel delinquency rate dropped 128 basis points to 13.76%
The office delinquency rate remained unchanged at 8.17%
The multifamily delinquency rate fell 50 basis points but remains worst major property type at 16.44%.
The retail delinquency rate dropped 47 basis points to 7.38% and remains the best performing major property type
Loan Resolutions
A little more than $1 billion in CMBS conduit loans were resolved with losses in August, as the rate of loan resolutions slowed for the second consecutive month, according to Trepp. Unfortunately, the average loss severity was up sharply from the July reading.
In total, 159 loans were liquidated in August. (That compares to 175 loans and $1.3 billion in face amount in July.) The losses on the August liquidations were about $505 million - representing an average loss severity of 49.9%. In July, the average loss severity was 40.2%.
The August loss severity average is well above the average loss severity of 42.2% over the last 20 months. The special servicers have been liquidating at a rate of about $1.01 billion per month over that time - so the liquidations this month are right at the average over the last 20 months.
Maturity Payoffs
The percentage of loans paying off on their balloon date barely budged last month.
In August, 39.5% of loans reaching their balloon date paid off. This was just a shade lower than July’s 39.6% reading. The August number was just above the 12 month rolling average of 39.2%, Trepp reported.
By loan count - as opposed to balance - only 43.1% of the loans paid off. This was down more than six points from July’s reading of 49.4%. On the basis of loan count, the 12 month rolling average is now 48.8%.
Prior to 2008, the payoff percentages were typically well north of 70%. Since the beginning of 2009, however, there have only been two months where more than half of the balance of the loans reaching their balloon date actually paid off.
Debt collector cheers payday lender reform
Australia's biggest private debt collection company stopped acting for payday lenders four months ago and backs federal government reform proposals which stand to put predatory lenders out of business.
Prushka Fast Debt Recovery Pty Ltd has 43,000 active clients nationwide.
It says its "no recovery, no charge" policy ensured it acted for more payday lenders than any other debt collection agency before it quit servicing the sector.
These were pretty hard to collect debts, so they were inclined to give them to us," chief executive Roger Mendelson told AAP.
"But we were losing money on it. The recovery rates we were getting were so far below the rates we get with other ledgers.
"You look at the type of debt and you just wonder how can these people ever be in business."
Mr Mendelson's comments come two weeks after Assistant Treasurer Bill Shorten unveiled proposed reforms for the industry designed to stop short-term lenders from overcharging vulnerable customers.
Payday lenders typically provide loans of between $200 and $2,000 that must be repaid within a short period of time, such as by the borrower's next payday.
Around half of customers have annual incomes below $24,000 and a quarter have incomes falling below the poverty line, according to a Treasury report released last Friday.
Borrowers usually have no access to other forms of credit, use the loan to meet basic living expenses and face interest rates from lenders of up to 48 per cent in NSW, Victoria, ACT, and Queensland.
Other states and territories have no interest rate cap.
They were lending to people who were in a vicious cycle and it wasn't going to solve people's problems. It was just going to compound it," Mr Mendelson said.
"We had people who, with all the fees and interest rates, were just in debt to these people forever."
Interest rates above 40 per cent are common, the fees are crippling, and "credit checking was almost nil", he says.
"We'd all be better off without them being in business."
If enacted, the reforms would set a national cap of 10 per cent on the up-front fee payday lenders can charge on loans, and a two per cent cap on the monthly fee they charge during the life of the loan.
Industry lobby group, the National Financial Services Federation (NFSF), has hit back, saying the industry will be wiped out because the proposed cap is "unreasonably low".
It says the minister has ignored Treasury's recommendation for a tiered interest rate cap to account for various costs of different types of loans.
"Mr Shorten has issued draft legislation which imposes a $10 establishment fee cap on a $100 loan ... one third the level indicated in the Treasury document," says Mark Redmond, NFSF chairman and managing director of Adelaide-based Summit Loans.
A tiered interest rate cap would maintain profitability of short-term lenders, limit the cost of credit for consumers, and reduce the incidence of repeat borrowings; but a flat rate cap "is unlikely to provide significant benefits for consumers", Treasury says.
A spokesman for the assistant treasurer said the proposed cap offered lenders a better deal depending on the life of the loan.
"It's 10 per cent plus two per cent per month, which is actually a better deal in many cases than the 48 per cent capped fee that they've got in NSW and Queensland."
© 2011 AAP.
Prushka Fast Debt Recovery Pty Ltd has 43,000 active clients nationwide.
It says its "no recovery, no charge" policy ensured it acted for more payday lenders than any other debt collection agency before it quit servicing the sector.
These were pretty hard to collect debts, so they were inclined to give them to us," chief executive Roger Mendelson told AAP.
"But we were losing money on it. The recovery rates we were getting were so far below the rates we get with other ledgers.
"You look at the type of debt and you just wonder how can these people ever be in business."
Mr Mendelson's comments come two weeks after Assistant Treasurer Bill Shorten unveiled proposed reforms for the industry designed to stop short-term lenders from overcharging vulnerable customers.
Payday lenders typically provide loans of between $200 and $2,000 that must be repaid within a short period of time, such as by the borrower's next payday.
Around half of customers have annual incomes below $24,000 and a quarter have incomes falling below the poverty line, according to a Treasury report released last Friday.
Borrowers usually have no access to other forms of credit, use the loan to meet basic living expenses and face interest rates from lenders of up to 48 per cent in NSW, Victoria, ACT, and Queensland.
Other states and territories have no interest rate cap.
They were lending to people who were in a vicious cycle and it wasn't going to solve people's problems. It was just going to compound it," Mr Mendelson said.
"We had people who, with all the fees and interest rates, were just in debt to these people forever."
Interest rates above 40 per cent are common, the fees are crippling, and "credit checking was almost nil", he says.
"We'd all be better off without them being in business."
If enacted, the reforms would set a national cap of 10 per cent on the up-front fee payday lenders can charge on loans, and a two per cent cap on the monthly fee they charge during the life of the loan.
Industry lobby group, the National Financial Services Federation (NFSF), has hit back, saying the industry will be wiped out because the proposed cap is "unreasonably low".
It says the minister has ignored Treasury's recommendation for a tiered interest rate cap to account for various costs of different types of loans.
"Mr Shorten has issued draft legislation which imposes a $10 establishment fee cap on a $100 loan ... one third the level indicated in the Treasury document," says Mark Redmond, NFSF chairman and managing director of Adelaide-based Summit Loans.
A tiered interest rate cap would maintain profitability of short-term lenders, limit the cost of credit for consumers, and reduce the incidence of repeat borrowings; but a flat rate cap "is unlikely to provide significant benefits for consumers", Treasury says.
A spokesman for the assistant treasurer said the proposed cap offered lenders a better deal depending on the life of the loan.
"It's 10 per cent plus two per cent per month, which is actually a better deal in many cases than the 48 per cent capped fee that they've got in NSW and Queensland."
© 2011 AAP.
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