As Unemployment Falls, Will CMBS Late-Pays Follow? via GlobeSt.com

It appears that as goes the jobs reports, so goes CMBS delinquency. So says Standard & Poor’s, which highlighted the correlation between the gradually declining US unemployment rate and the gradually diminishing CMBS delinquency rate in a recent report.

“As we’ve observed in the past, the delinquency rate tracks job growth fairly closely,” S&P analyst Larry Kay wrote in a quarterly report issued in late February. “With the unemployment rate falling for the fifth straight month in January, the credit pendulum may reverse course if this trend continues, which could set the stage for lower delinquency rates.” Along these lines, Moody’s Investors Services noted a correlation between an uptick in hiring, improving commercial real estate fundamentals and a lessening of losses on CMBS maturity defaults, even if 2012 may bring a number of such defaults as 2007-vintage loans come due.

Although neither S&P nor Moody’s had issued their reports on CMBS late-pays for February by press time, both ratings agencies as well as Trepp have charted a downward trend in delinquencies lately. S&P’s latest figures put CMBS delinquency at 8.86% in January, down from 8.95% at the end of 2011, although it noted that the delinquency rate remained relatively flat throughout 2011 even as the actual dollar amount of loans in arrears eroded.

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