Hotel-backed mortgage default rates rose in December compared to November, but retail loan performance improved, three reports found.
In the case of late payments for all property types, the three reports by Fitch Ratings, Trepp and the Mortgage Bankers Association differ in their results due to different methodology and scope. Fitch and Trepp only measure commercial mortgage-backed securities, while the MBA includes other sources of capital.
As a result, Fitch saw a 4 basis point drop to 4.69% in December 2020 among deals it rated, compared to 4.73% in November. That number, however, was a sharp increase from 1.45% at the end of 2019. This was due to the strong volume of new issues during the month, Fitch noted, adding that it was the second straight month of decline.
In the universe of businesses tracked by Trepp, the crime rate fell from 8.17% in November to 7.81% in December. This is a six month decline in this group. In December 2019, the crime rate was 2.34%.
Previously, the Kroll Bond Rating Agency also reported that December was the sixth straight month that CMBS arrears fell.
The MBA's CREF Loan Performance Survey found that approximately 6% of these loans were delayed in December, up from 5.7% in November. However, the increase was almost entirely due to newly defaulted loans, as payments less than 30 days late rose from 1% in November to 1.5% in December. The MBA began collecting this data in April.
"Crime rates fell for several months as the economy stabilized. More recently, the added stress of a winter wave of the virus has weakened the economy and challenged some property owners as property incomes were disrupted," said Jamie Woodwell, vice of the MBA president of commercial real estate research said in a press release. "The launch of multiple COVID-19 vaccines is good news long-term, but the surge in commercial mortgage arrears last month confirms that there are still many challenges ahead of the economy fully reopening."
For mortgages only in CMBS, the MBA's survey found a slight increase in arrears from 10.4% in the previous month to 10.5% in December.
Hotel real estate arrears on Fitch-rated CMBS transactions rose from 17.33% in November to 18.38% in December and 1.41% at the end of 2019. According to the MBA, 22.5% of the remaining balance of accommodation loans in December was out of date . from 22.1% in November. For Trepp, 19.8% of those loans were 30 days or longer at the end of December, compared with 19.66% in November and 1.53% 12 months earlier.
For retail, the other type of property hit hardest by the pandemic, all three measures reported month-on-month improvement in performance.
Fitch's December retail crime rate was 10.98% from 11.11% in November, while the MBA was 11.9% after 12.9%. Trepp reported a crime rate of 12.94% for retail properties in December compared to 14.21% in the previous month.