Late payments on commercial property loans packaged into collateralized debt obligations climbed 0.7 basis points to 14.8% last month, Fitch Inc. said.
Losses on the debt pools were about $164 million in April, compared with $73 million the previous month, Fitch said in a report Friday. Delinquencies will likely "fluctuate" between 13% and 16% for the rest of the year, according to the rating company.
Late payments within CDOs, which pool assets and slice then into securities of varying risk, have surged from below 1% in April 2008 as borrowers struggled to refinance after property values plunged. The Moody's/REAL Commercial Property Price Index is down about 44.6% from the peak of October 2007.
The largest loss in the securities last month occurred after a senior lender took a "deed in lieu," or voluntary dispossession, on land located near the Las Vegas Strip, which led investors in two CDOs to write their investment to zero, Fitch said. "Many of the realized losses stemmed from foreclosure or deed in lieu of foreclosure actions that wiped out subordinate positions" held by some CDOs, Fitch analyst Stacey McGovern said in the report.
Sales of CDOs linked to commercial real estate debt climbed to $35 billion in 2006 from $16.1 billion in 2005, according to Credit Suisse Group AG. Another $35 billion was sold in 2007.
Offerings plummeted after the financial crisis. There have been no newly issued CDOs linked to commercial property loans since 2007.
