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MBA: Credit Markets and Economy Add Pressure to Commercial Mortgage Performance

Tuesday, December 09, 2008 - Mortgage Bankers Association

 

WASHINGTON, D.C. - Delinquency rates continued to tick up in the third quarter for most commercial/multifamily mortgage investors, but remained at the low end of their historical ranges, according the third quarter Commercial/Multifamily Delinquency Report from the Mortgage Bankers Association (MBA).

 

"The frozen credit markets and deteriorating economic conditions are placing increased pressure on the performance of commercial and multifamily mortgages," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "Commercial/Multifamily mortgages have not seen the same kind of deterioration in performance witnessed among other real estate loans, and at the end of the third quarter, delinquency rates for every investor group remained at the lower end of their historical ranges.  That being said, delinquency rates for nearly every investor group did see increases during the third quarter, and economic and credit market stress is likely to continue that trend."

 

Between the first and second quarters, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 0.10 percentage points to 0.63 percent.  The 60+ day delinquency rate on loans held in life company portfolios rose 0.03 percentage points to 0.06 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.05 percentage points to 0.16 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Freddie Mac fell 0.02 percentage points to 0.01 percent.  The 90+day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.29 percentage points to 1.47 percent.

 

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.

 

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:  0.63 percent (30+ days delinquent or in REO)
  • Life company portfolios:  0.06 percent (60+days delinquent)
  • Fannie Mae:  0.16 percent (60 or more days delinquent)
  • Freddie Mac:  0.01 percent (60 or more days delinquent)
  • Banks and thrifts:  1.47 percent (90 or more days delinquent or in non-accrual)

 

To put these numbers in context, of 35,135 commercial/multifamily loans in life company portfolios, with a total unpaid principal balance of $253 billion, only 36 loans with an aggregate UPB of less than $144 million were 60+ days delinquent at the end of the quarter.  Of $1.2 trillion of commercial/multifamily mortgages at FDIC-insured banks and thrifts, only $18 billion was 90+ days delinquent.

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