According to a new report from Morgan Stanley, delinquencies on commercial loans packaged and sold off as bonds topped the 10% mark last month for the first time in the United States. Morgan Stanley analysts said that payments that were more than 30 days late jumped 26 basis points to 10.15% in April. Delinquency rates for loans bundled into securities during the bubble years, when property values peaked amid lax underwriting, have reached 10.37% for 2006 deals and 13.26% for those in 2007.
"The bottom line is that loan performance is not yet exhibiting significant improvement," according to the analysts led by Richard Parkus in New York. "Many market participants have come to believe that credit deterioration is more or less over, and were caught off guard by April’s rise."
"Loans originated after 2005 had weaker loan characteristics," Parkus said in a telephone interview with Bloomberg. "On top of that, they were done at the peak of the cycle so they didn't benefit from any price appreciation prior to the crisis."
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