Joe Petro

http://www.realpoint.com

1 Comment

    • ON: Wed Apr 9th 08:11 AM
      Commented on:
      Mortgage REITs: Stick with the Seasoned Veterans
      This article is a clear case of irresponsible journalism by the author. He is selectively choosing paragraphs from the Realpoint Monthly Delinquency report, rather than addressing the entire report, to make an inaccurate point that Realpoint is painting an alarming picture concerning delinquencies in CMBS. The realty is that the numbers he quoted from the Realpoint report concerning the increase in delinquency are accurate and are stated in the very first paragraph of the Realpoint report. The author obviously continued to read (and copy) the second paragraph of the Realpoint report regarding the delinquency contribution from 2005 & 2006 issuance. This must be where he stopped reading and copying the Realpoint report because had he read the next paragraph, he would have seen that Realpoint clearly addressed the overall delinquency percentage being less than half a percentage point of the outstanding balance.

      The first three paragraphs of the Realpoint Monthly Delinquency Report read as follows:

      Concerns relative to underlying collateral performance and payment ability are becoming more evident on a monthly basis, as the delinquent unpaid balance for CMBS increased to a trailing 12-month high of $3.48 billion through February 2008, up from $3.16 billion a month prior. This figure is also up 57% from a six year low of only $2.21 billion in March of 2007. On the surface, each delinquency category reflected an increase in February 2008, including a $206 million increase across the 30-day, 60-day, and 90+-day categories. Of greater concern however is that delinquency degradation continued in the 90-day, Foreclosure and REO delinquency categories for the third straight month. Collectively, these three categories grew by an additional $178.8 million in February (an increase of 9% from January, and 18% from December 2007). Furthermore, this degradation took place despite another $86.97 million in liquidations reported for February 2008 (at a low average severity of 20.3%). Liquidation activity however has slowed somewhat amidst the current credit market climate.

      Increased delinquency for the more recent vintages remains at the center of our concerns, especially that of 2005 and 2006 vintage transactions. Over 40% of delinquent unpaid balance through February 2008 came from transactions issued in these two years, with nearly 22% of all delinquency found in 2006 transactions. If we extend our review to include the 2007 vintage, an additional 7% of total delinquency is found. We now expect to see continued high delinquency by unpaid balance for these three vintages in the near-term due to aggressive lending practices prevalent in such years, continued through the remainder 2008.

      The total unpaid balance for all CMBS pools under review by Realpoint was $871.4 billion in February 2008. The delinquent unpaid balance over the trailing twelve months is shown in Chart 1 below. The delinquency ratio for February 2008 was 0.399%, increased from the prior month and 21% above the 0.329% reported one-year prior in February 2007.

      If anyone is interested in obtaining a copy of the entire Realpoint Monthly Delinquency Report that was mentioned in this article, please send me an email and I will provide you with an electronic copy of the report.

      Joseph Petro
      Managing Director
      Realpoint LLC
      Joe.petro@realpoint.co...
      View article »
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