Trepp reported that special servicing rate for multifamily commercial mortgage-backed securities (CMBS) loans moved higher in August, climbing 60 basis points. The overall CMBS special servicing rate on commercial property continued to rise, as rates on mixed-use and office properties also jumped. However, loan loss severity fell for the month.
Multifamily CMBS special servicing rates jump higher
In August, special servicing rates on CMBS loans on multifamily property rebounded after two months of declines. The August rate increase is 28 basis point greater than the total of the declines over the prior two months. According to Trepp, the multifamily special servicing rate, now 5.71 percent, is at its highest level since 2015.
The report found that the overall CMBS special servicing rate rose to 8.46 percent, up from 8.30 percent the month before. This rate has been steadily rising since reaching a post-pandemic low in July 2022.
The special servicing rate on CMBS loans on industrial properties is again by far the lowest of any commercial property type covered. This month, it ticked down 1 basis point to 0.39 percent. The rate on lodging properties rose 9 basis points to 7.42 percent. The special servicing rate on office properties had the largest gain for the month, rising 66 basis points to 11.91 percent. The rate on retail properties rose slightly, adding 3 basis points higher to 10.92 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.
Loan loss severity falls
Trepp also recently reported on the volume and severity of loan losses on CMBS loans which were resolved in August, although it does not break down this data by the type of property covered by the loans. The history of this data since August 2022 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 in August fell to 55.2 percent in August with an average loss per loan of $5.2 million. The number of loans resolving in the August rose 1 to 9. However, the total dollar value of the loans that resolved was down significantly, falling to $47.2 million. This is the lowest volume since November 2023.
Since monthly loan loss data can be volatile, Trepp also reports on the 12-month trailing average loss severity. After declining slightly last month, this figure moved higher again this month, reaching 65.29 percent. It had been 63.98 percent last month. A year ago, it was 50.95 percent.
The August loan loss severity report can be found here.
