MBA: Second Quarter Delinquencies Remain Low; CMBS Increases Slightly

Delinquency rates for commercial and multifamily mortgage loans were relatively flat in the second quarter, the Mortgage Bankers Association said in its Commercial/Multifamily Delinquency Report.

“Loans backed by commercial and multifamily properties continue to perform extremely well,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. For most lender types–including banks, life insurance companies, Fannie Mae and Freddie Mac–delinquency rates are at or near their all-time lows.”

Woodwell said the commercial mortgage backed securities market is the one outlier. “The slower decline in the balance of loans that are delinquent than in the total of all loans has pushed the delinquency rate higher,” he said. “We expect that situation to reverse in coming quarters.”

The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac. Together, these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.

Based on the unpaid principal balance of loans, delinquency rates for each group at the end of the second quarter were as follows:

–Banks and thrifts (90 or more days delinquent or in non-accrual): 0.54 percent, a decrease of 0.02 percentage points from the first quarter;

–Life company portfolios (60 or more days delinquent): 0.02 percent, an increase of 0.02 percentage points from the first quarter;

–Fannie Mae (60 or more days delinquent): 0.04 percent, a decrease of 0.01 percentage points from the first quarter;

–Freddie Mac (60 or more days delinquent): 0.01 percent, a decrease of 0.02 percentage points from the first quarter;

–CMBS (30 or more days delinquent or in REO): 4.84 percent, an increase of 0.39 percentage points from the first quarter.

The analysis incorporates the measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another.

Construction and development loans are not included in the numbers presented here, but are included in many regulatory definitions of “commercial real estate” despite the fact they are often backed by single-family residential development projects rather than by office buildings, apartment buildings, shopping centers, or other income-producing properties. The Federal Deposit Insurance Corp. delinquency rates for bank and thrift held mortgages reported here do include loans backed by owner-occupied commercial properties.

Differences between the delinquencies measures are detailed in Appendix A.

To view the report, click https://www.mba.org/Documents/Research/2Q17CMFDelinquency.pdf.