Commercial Mortgage Delinquencies Mixed in Q-2, Says MBA

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

The delinquency rate for loans held in commercial mortgage-backed securities (CMBS) is the highest since the series began in 1997.  Delinquency rates for other groups remain below levels seen in the early 1990's, some by large margins.

Between the first quarter and second quarter 2010, the 30+ day delinquency rate on loans held in CMBS rose 1.39 percentage points to 8.22 percent.  The 60+ day delinquency rate on loans held in life company portfolios decreased 0.02 percentage points to 0.29 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.01 percentage points to 0.80 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.03 percentage points to 0.28 percent.  The 90+ day delinquency rate on loans held by FDIC-insured banks and thrifts remained unchanged at 4.26 percent.

"Different investor groups lend in different ways and on different types of properties," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "Those differences are becoming more evident as the economy continues to struggle to work its way out of the recession.  Life insurance companies, Fannie Mae and Freddie Mac continue to see relatively low delinquency rates on their commercial and multifamily mortgages, the delinquency rate on banks' commercial and multifamily mortgages appears to have reached a plateau, and the delinquency rate for loans in CMBS continued to climb during the period.  Performance across all investor groups will continue to depend on economic growth and its ability to generate demand for commercial real estate space."

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 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 80 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 (UPB), delinquency rates for each group at the end of the second quarter were as follows:

● CMBS:  8.22 percent (30+ days delinquent or in REO);

● Life company portfolios: 0.29 percent (60+days delinquent);

● Fannie Mae:  0.80 percent (60 or more days delinquent)

● Freddie Mac:  0.28 percent (60 or more days delinquent);

● Banks and thrifts:  4.26 percent (90 or more days delinquent or in non-accrual).

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