More Loans Pay Off at Maturity

The percentage of loans paying off at maturity has hit the highest level since December 2008. That’s according to the recent Trepp March Payoff Report, which finds that the percentage cracked the 50 percent threshold for only the second time since that time, with 55.5 percent of loans reaching their balloon date paid off in March.

The percentage of loans paying off at maturity has hit the highest level since December 2008. That’s according to the recent Trepp March Payoff Report, which finds that the percentage cracked the 50 percent threshold for only the second time since that time, with 55.5 percent of loans reaching their balloon date paid off in March.

Over the last 12 months, the average percentage of loans by balance paying off each month has been 36.7 percent – meaning that the March figure is well above average.

Trepp also notes another disaprity from recent trends: the percentage of loans paying off by balance – 55.5 percent – was higher than the percentage paying off by loan count, which was 52.2 percent. This could point to larger loans paying off in a timely fashion, which Trepp believes means that larger loans and trophy properties are finding it easier to get financing in today’s market.

Could this rising tide lift all boats? Perhaps. Prior to 2008, the payoff percentages were typically higher than 70 percent, which would indicate that it wasn’t just the larger loans finding financing but other-sized loans as well.

Let’s look at some of Trepp’s data going back 32 months to August 2008. At that time, 74.5 percent of loans were paid off by balance at maturity, with 81.8 percent paid off after three months and 87.7 percent paid off after six months. That figure spiked to 80 percent paid off by balance at maturity in September 2008 and then began to drop precipitously. Two months after that spike, in November 2008, only 38.7 percent were paid off by balance at maturity date. The lowest figure noted by Trepp came in March 2009, when a mere 14.9 percent of loans were paid off by balance at maturity.

It would be premature to grow optimistic merely because these data are improving. However, taken with the big picture, it may give the industry another reason to let go of the breath they’ve been holding since the recession began.