MBA: 4Q Commercial, Multifamily Mortgage Delinquency Rates Decline

MBA NewsLink Staff

Commercial and multifamily mortgage delinquencies declined in the fourth quarter, the Mortgage Bankers Association reported Monday in its Commercial/Multifamily Delinquency Report.

“Commercial and multifamily mortgage performance continues to normalize, with delinquency rates down or flat for every major investor group,” said Jamie Woodwell, MBA Vice President of Commercial Real Estate Research.

Woodwell noted delinquencies for some sectors appear to remain elevated. “For some, lenders and servicers continue to work out loans that were hard hit by the pandemic,” he said. “For others, the method of reporting may classify forborne or other loans as delinquent, even when they are back on track. Delinquency rates are back down to at or near their pre-pandemic levels in other sectors.”

MBA’s quarterly analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities, life insurance companies and Fannie Mae and Freddie Mac. Together, these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding. MBA 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. For example, Fannie Mae reports loans receiving payment forbearance as delinquent, while Freddie Mac excludes those loans if the borrower is in compliance with the forbearance agreement.

Based on the unpaid principal balance of loans, delinquency rates for each group at year-end 2021 were as follows:

• Banks and thrifts (90 or more days delinquent or in non-accrual): 0.59 percent, a decrease of 0.10 percentage points from third-quarter 2021;
• Life company portfolios (60 or more days delinquent): 0.04 percent, unchanged from the third quarter;
• Fannie Mae (60 or more days delinquent): 0.42 percent, unchanged from the third quarter;
• Freddie Mac (60 or more days delinquent): 0.08 percent, a decrease of 0.04 percent from the third quarter; and
• CMBS (30 or more days delinquent or in REO): 4.02 percent, a decrease of 0.84 percentage points from the third quarter.

Construction and development loans are generally not included in the numbers presented in this report 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 FDIC delinquency rates for bank and thrift held mortgages reported here do include loans backed by owner-occupied commercial properties.

To view the report, visit: https://www.mba.org/Documents/Research/4Q21CMFDelinquency.pdf. Differences between the delinquency measures are detailed in Appendix A.

To better understand the ways the COVID pandemic is and is not affecting commercial mortgage performance, MBA worked with its servicer members to develop the CREF Loan Performance Survey. For more information on the most recent results and the historical series visit: https://www.mba.org/store/products/research/general/report/commercial-real-estate-finance-loan-performance-survey.