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NEW YORK CITY-The pace of legacy CMBS loan resolutions may have accelerated in recent months, but not rapidly enough to keep the delinquency rate from climbing, Fitch Ratings and Trepp said last week. Given the traffic in loan sales this year—Miami-based special servicer LNR Partners recently disposed of $1 billion worth of distressed debt in a single portfolio—“that’s a story in itself,” Peter Tobin, managing director of sales and trading at Mission Capital Advisors, tells GlobeSt.com. The fact that the delinquency rate keeps rising “speaks volumes in the face of those liquidations.”

As the delinquency rate continues ticking upward—Fitch puts the September total at 8.66% of Fitch-related loans, while Trepp says it’s 9.05%, the highest on record—the driving factor has changed. “Initially, the wave of bad loans was due to slack underwriting,” says Tobin, whose company has handled numerous sales of non-performing loans. “You had all these pro forma underwritings. In-place expenses and income weren’t used; rather, pro forma was used to basically inflate the value of the property and buy more debt.” When the projected numbers didn’t materialize, the inevitable result was default.

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