MBA: 3Q Commercial and Multifamily Mortgage Delinquencies Remain Low

Delinquency rates for commercial and multifamily mortgage loans remained low in the third quarter, according to the Mortgage Bankers Association’s latest Commercial/Multifamily Delinquency Report.

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

–Banks and thrifts (90 or more days delinquent or in non-accrual): 0.48 percent, a decrease of 0.02 percentage points;

–Life company portfolios (60 or more days delinquent): 0.04 percent, an increase of 0.01 percentage point;

–Fannie Mae (60 or more days delinquent): 0.07 percent, a decrease of 0.03 percentage points;

–Freddie Mac (60 or more days delinquent): 0.01 percent (unchanged);

–Commercial mortgage-backed securities (30 or more days delinquent or in REO): 3.05 percent, a decrease of 0.47 percentage points.

“Commercial and multifamily mortgage delinquency rates are extremely low right now,” said MBA Vice President for Commercial Real Estate Research Jamie Woodwell. “The delinquency rate for loans held on bank balance sheets set a new series low, and delinquency rates for loans held by life companies or guaranteed by Fannie Mae and Freddie Mac are all below 10 basis points.”

Woodwell noted loans held in CMBS have a higher “headline” delinquency rate because of the way the industry reports on those loans. “But if one pulls out loans in foreclosure or real estate owned–which are generally excluded from the calculations for the other groups–the CMBS delinquency rate is just 45 basis points, the same level as December 2005.”

MBA’s quarterly analysis looks at commercial/multifamily delinquency rates for five of the largest investor groups. Together, these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.

MBA’s 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 generally not included in the numbers presented here, but are included in many regulatory definitions of “commercial real estate” despite 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.

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