MBA: Commercial/Multifamily Delinquencies Continue Downward Trend in 2nd Quarter

Delinquency rates for commercial and multifamily mortgage loans continued to decline in the second quarter, the Mortgage Bankers Association reported this morning in its quarterly Commercial/Multifamily Delinquency Report. 

“As commercial property incomes and values continue to climb, and financing remains plentiful, loan performance continues to improve as well,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. “Commercial and multifamily mortgage delinquency rates were down broadly in the second quarter, with highlights including the lowest 90+ day delinquency rate on bank-held multifamily loans since the series began in 1993, and 60+ day delinquency rates below 0.06 percent for loans held by life companies, Fannie Mae and Freddie Mac.”  

The MBA 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; 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): 0.90 percent, a decrease of 0.13 percentage points from the first quarter;
• Life company portfolios (60 or more days delinquent): 0.06 percent, unchanged from first quarter;
• Fannie Mae (60 or more days delinquent): 0.05 percent, a decrease of 0.04 percentage points first quarter.
• Freddie Mac (60 or more days delinquent): 0.01 percent, a decrease of 0.02 percentage points first quarter;
• CMBS (30 or more days delinquent or in REO): 5.00 percent, a decrease of 0.17 percentage points from the first quarter;  

The analysis incorporates the same 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. 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 www.mba.org/documents/2Q15CMFDelinquency.pdf.