Commercial/Multifamily Delinquencies Remain Low, CMBS Up Slightly

Real Estate In-Depth | December 2016

WASHINGTON—Delinquency rates for commercial and multifamily mortgage loans remained low in the third quarter of 2016, according to the Mortgage Bankers Association’s Commercial/Multifamily Delinquency Report.

“Commercial and multifamily mortgage delinquencies were once again quite low in the third quarter, because of the continued strength in the market fundamentals,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Delinquency rates generally fell, staying near 20-year lows for loans held by banks, life insurance companies and Fannie Mae and Freddie Mac. Loans held in commercial mortgage-backed securities were the one major group to see a slight increase in the rate—largely driven by the fact that many of the stronger loans that are set to mature in 2016 and 2017 are paying off, reducing the denominator and leaving behind weaker loans. This trend is likely to continue for the next few quarters.”

The MBA 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, Fannie Mae, and Freddie Mac. Together these groups hold more than 80% of commercial/multifamily mortgage debt outstanding.

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

  • Banks and thrifts (90 or more days delinquent or in non-accrual): 0.62%, a decrease of 0.04 percentage points from the second quarter of 2016;
  • Life company portfolios (60 or more days delinquent): 0.08%, a decrease of 0.03 percentage points from the second quarter of 2016;
  • Fannie Mae (60 or more days delinquent): 0.07%, unchanged from the second quarter of 2016.
  • Freddie Mac (60 or more days delinquent): 0.01%, a decrease of 0.01 percentage points from second quarter of 2016;
  • CMBS (30 or more days delinquent or in REO): 4.23 percent, an increase of 0.19 percentage points from the second quarter of 2016;

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. The FDIC delinquency rates for bank and thrift held mortgages do include loans backed by owner-occupied commercial properties.