Trepp reported that special servicing rate for multifamily commercial mortgage-backed securities (CMBS) loans increased again in December, jumping 135 basis points. It is now up 361 basis points since July. The overall CMBS special servicing rate on commercial property also rose.
Multifamily CMBS special servicing rates soaring
The special servicing rates on CMBS loans on multifamily property climbed at the second fastest rate of the loan types tracked by Trepp. The special servicing rate hit 8.72 percent. It was only at 3.17 percent one year ago.
The report found that overall CMBS special servicing rate rose to 9.89 percent, up from 9.53 percent the month before. This rate rose in every month of 2024.
The special servicing rate on mixed-use properties took the largest jump this month, climbing 181 basis points to 11.72 percent. This was largely driven by a $1 billion loan transferring to special servicing.
The special servicing rate on CMBS loans on industrial properties is again by far the lowest of any commercial property type covered, although it took a significant upward move this month. It climbed 18 basis points to 0.56 percent.
The rate on lodging properties rose 11 basis points to 8.29 percent.
The special servicing rate on office properties climbed 15 basis points to 14.48 percent. Office properties have had the highest special servicing rate since surpassing retail in July 2024.
The rate for retail properties was the only one to fall this month. It declined 12 basis points to 11.67 percent.
The history of the overall and multifamily CMBS special servicing rates as reported by Trepp since January 2020 is illustrated in the chart, below.
The full Trepp special servicing rate report can be found here.
Average loan loss down sharply
Trepp’s report on the volume and severity of loan losses on CMBS loans which were resolved in December showed big jump in the number of loans disposed but a big decline in the total loan amount disposed and the losses incurred.
The report contained a chart illustrating characteristics of 15 of the 16 loans that were resolved for a loss in the month. None of them was on a multifamily property.
The history of the average losses incurred and the loss severity over the last 25 months is shown in the next chart, which shows the average loss incurred per resolved loan along with the average percentage of a resolved loan’s value that was lost during resolution.
The chart shows that the severity of CMBS loan losses declined again in December, falling almost 2 percentage points to 54.71 percent. The average dollar loss per loan also fell, dropping to $2.5 million, the lowest level since May 2023. The number of loans resolving in December rose from 9 to 16, well above the 12-month average of 11 loans per month. The total dollar value of the loans that resolved fell to $71.8 million from $176.5 million the month before.
Since monthly loan loss data can be volatile, Trepp also reports on the 12-month trailing average loss severity for loans with losses of greater than 2 percent. This figure eased slightly to 64.67 percent this month, down from 65.53 percent last month. A year ago, it was 56.34 percent. The December loan loss severity report can be found here.
