U.S. Commercial, Multifamily Mortgage Delinquency Rates Mixed in Q1

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According to the Mortgage Bankers Association's (MBA) Commercial/Multifamily Delinquency Report, delinquency rates among different commercial/multifamily mortgage investor groups were mixed in the first quarter of 2011.

The delinquency rate for loans held in commercial mortgage-backed securities (CMBS) reached the highest level since the series began in 1997, but the climb was slower than in recent quarters. Delinquency rates for other groups remain below levels seen in the last major real estate downturn during the early 1990s -- some by large margins.

Between the fourth quarter of 2010 and first quarter of 2011, the 90+ day delinquency rate on loans held by FDIC-insured banks and thrifts remained the same at 4.18 percent. The 30+ day delinquency rate on loans held in CMBS increased 0.23 percentage points to 9.18 percent. The 60+ day delinquency rate on loans held in life company portfolios decreased 0.05 percentage points to 0.14 percent. The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae decreased 0.07 percentage points to 0.64 percent. The 60+ day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.10 percentage points to 0.36 percent.

The first quarter 2011 delinquency rate for commercial and multifamily mortgages held by banks and thrifts was 2.40 percentage points lower than the series high (6.58 percent, reached in the second quarter of 1991). The rate for loans held in CMBS was a record high for the series. The delinquency rate for commercial and multifamily mortgages held in life insurance company portfolios was 7.23 percentage points lower than the series high (7.37 percent, reached during the fourth quarter of 1993);  the rate for multifamily loans held by Fannie Mae was 2.98 percentage points lower than the series high (3.62 percent, reached during the fourth quarter of 1991); and the rate for multifamily loans held by Freddie Mac was 6.45 percentage points lower than the series high (6.81 percent, reached in 1992).

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 that 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.

The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor groups: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac.  Together these groups hold more than 86 percent of commercial/multifamily mortgage debt outstanding.

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.

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

• CMBS: 9.18 percent (30+ days delinquent or in REO);

• Life company portfolios: 0.14 percent (60+ days delinquent);

• Fannie Mae: 0.64 percent (60+ days delinquent)

• Freddie Mac: 0.36 percent (60+ days delinquent);

• Banks and thrifts: 4.18 percent (90+ days delinquent or in non-accrual).

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