Economic Fallout Still Impacting Commercial Real Estate Investors' Mortgage Delinquency Rates

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(WASHINGTON, DC) -- According to the Mortgage Bankers Association's (MBA) newly released Commercial/Multifamily Delinquency Report, delinquency rates continued to increase in the fourth quarter for most commercial/multifamily mortgage investor groups.

Between the third and fourth quarters, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 1.63 percentage points to 5.69 percent.  The 60+ day delinquency rate on loans held in life company portfolios decreased 0.04 percentage points to 0.19 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.01 percentage points to 0.63 percent.  The 90+ day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.04 percentage points to 0.15 percent.  The 90+day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.49 percentage points to 3.92 percent.

"The ongoing impact of the economic fallout on commercial real estate markets continued to drive up commercial and multifamily mortgage delinquencies for most investor groups in the fourth quarter," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "Continued job losses, consumer restraint and a lack of household growth all sustained the pressure on commercial real estate operations and mortgages during the fourth quarter."

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 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 fourth quarter were as follows:

• CMBS:  5.69 percent (30+ days delinquent or in REO);
• Life company portfolios:  0.19 percent (60+days delinquent);
• Fannie Mae:  0.63 percent (60 or more days delinquent)
• Freddie Mac:  0.15 percent (90 or more days delinquent);
• Banks and thrifts:  3.92 percent (90 or more days delinquent or in non-accrual).

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 percent of commercial/multifamily mortgage debt outstanding.

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