Chart of the Week: Commercial Mortgage Delinquency Rates, Range
Source: Mortgage Bankers Association
Commercial mortgage delinquencies rose in the most recent quarter, with increases recorded across most major capital sources. While the specific drivers vary by loan type and property sector, the trend underscores continued stress in commercial real estate, particularly within office and multifamily. The chart illustrates the share of loan balances that are delinquent by capital source with their current delinquency rate versus the historical range of delinquency rates per capital source. As shown above, the delinquency rates for CMBS and Fannie Mae are above the midpoints of their respective historical ranges.
Increases Across All Capital Sources
Delinquency rates increased for CMBS, life companies, Fannie Mae, Freddie Mac, and banks and thrifts in the second quarter. These increases, while varying in magnitude, are consistent with broader market pressures. CMBS delinquencies climbed due to challenges in refinancing and property level stress, particularly in office. Life company portfolios also saw increases, though from historically low levels. Fannie Mae and Freddie Mac multifamily portfolios registered moderate increases, while banks and thrifts reflected higher delinquencies across commercial real estate loans.
Multifamily and Office Remain Key Drivers of the Increases
The bulk of the pressure is concentrated in office and multifamily loans. Office markets are adjusting to persistent hybrid and remote work, creating vacancy and valuation challenges. Multifamily loans, while benefiting from relatively strong demand, are facing cost pressures from insurance, maintenance, and slower rent growth in certain markets.
Looking Ahead
Although delinquency levels remain below peaks observed during the Global Financial Crisis, the increases across capital sources highlight the importance of monitoring performance. Outcomes will depend heavily on the path of interest rates, property fundamentals, and refinancing conditions over the coming year.
