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CMBS Debt Relief Requests Decline, But Expected to Rebound in May

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After facing a tsunami requests for relief in the first half of April, loan officers saw a drop in inquiries in the last two weeks of the month. But it probably won’t last.

During the two-week period ending April 26, the four largest major commercial mortgage-backed securities services (Wells Fargo, Midland, Keybank and Berkadia) received a total of 1,301 inquiries, or less than half of the 2,824 total in the previous two-week period, according to a new report from Fitch Ratings. The total amount of affected loans declined only slightly, from $ 51.5 billion to $ 48.5 billion.

“This is not a positive indicator, but probably the calm before the storm as larger delinquencies and more requests for relief arrive in May,” Adam Fox, senior director of Fitch US CMBS, said in a statement.

The drop in inquiries appears to be due to the “month-end schedule and collection of rents and debt service payment in April,” the report said, noting that agents expect more defaults. this month.

In the multi-family sector, for example, early predictions of a massive drop in rents turned out to be exaggerated because 89 percent of tenants made payments in April – although many landlords expect May to be worse.

During the same period as the queries decline, however, the number of loans transferred to special services fell from 113 to 218, or $ 8.4 billion from $ 5.7 billion. However, the report notes that not all of these loans are necessarily in default. In May, Fitch “expects special service transfers to increase as defaults increase and more complex changes are needed.”

Almost 26% of all CMBS borrowers have contacted their services since Fitch began collecting data on the pandemic, the report notes. In the meantime, 3% have been transferred to a special service.

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