Commercial mortgage-backed securities issuance is picking up after a slow January in which only $3.5 billion was issued -- slightly more than half of the $6.4 billion issued in January 2014, according to Commercial Mortgage Alert. Five deals totaling $9.8 billion are underway.
Issuance of commercial mortgage-backed securities continues to grow, with volume expected to reach $60 billion to $80 billion this year, according to Trepp. Retail commercial mortgage-backed securities are making up about 34% of overall issuance, less than in 2010 but much higher than in the pre-recession days. There are a number of reasons CMBS is growing, including the low interest rate environment and the need for capital in the industry.
State insurance regulators have hired BlackRock to assess losses the industry could suffer from holding commercial mortgage-backed securities. BlackRock, the largest money manager in the world, will review thousands of securities to determine loss expectations for CMBS holdings. Those findings will determine how much capital insurers will need to set aside for potential declines.
JPMorgan Chase's sale of commercial mortgage-backed securities indicates that investors are willing to bear higher risks as they search for yield. The bonds are backed by debt of an Australian developer of shopping malls that recently said its debt load had become "unsustainable." JPMorgan offered an inflated interest rate to attract enough investors.
The delinquent unpaid balance for commercial mortgage-backed securities increased by $387.9 million in July, compared with an average growth rate of slightly more than $3 billion a month during the first half of the year, according to Realpoint. It projects the delinquency percentage will grow 9% to 11% during the rest of the year.