MBA: Commercial, Multifamily Mortgage Delinquency Rates Increased in Second Quarter
Commercial and multifamily mortgage delinquencies increased in the second quarter of 2023, according to the Mortgage Bankers Association’s latest Commercial/Multifamily Delinquency Report.
“Delinquency rates on loans backed by commercial real estate properties rose during the second quarter for most capital sources,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “Although the uptick in delinquency rates was expected, they remain at the lower end of historical ranges. Higher and volatile interest rates, uncertainty about property values, and stresses in some property markets have increased pressure on some loans and properties.”
Woodwell noted not all commercial mortgage loans are facing the same pressures. “Loans backed by properties, and property types with stable cash flows, are experiencing different prospects than those that may have seen declines in incomes,” he said. “Additionally, long-term loans are experiencing less of a change in interest rates than those with shorter terms or adjustable rates. We expect these differences to continue to play out in coming quarters.”
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 (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. 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. As an 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 the end of the second quarter of 2023 were as follows:
• Banks and thrifts (90 or more days delinquent or in non-accrual): 0.66 percent, an increase of 0.09 percentage points from the first quarter of 2023;
• Life company portfolios (60 or more days delinquent): 0.14 percent, a decrease of 0.07 percentage points from the first quarter of 2023;
• Fannie Mae (60 or more days delinquent): 0.37 percent, an increase of 0.02 percentage points from the first quarter of 2023;
• Freddie Mac (60 or more days delinquent): 0.21 percent, an increase of 0.08 percentage points from the first quarter of 2023; and
• CMBS (30 or more days delinquent or in REO): 3.82 percent, an increase of 0.82 percentage points from the first quarter of 2023.
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. Differences between the delinquencies measures are detailed in Appendix A.
To download the current report, visit https://www.mba.org/news-and-research/research-and-economics/commercial-multifamily-research/commercial-multifamily-mortgage-delinquency-rates.
In addition to this report, MBA works with its servicer members to develop the CREF Loan Performance Survey each quarter. For more information on the most recent results and the historical series, please click here.