Commercial And Multifamily Delinquency Rates Increased Slightly Through The First Quarter

April 18, 2023 PROGRESS In Lending

Delinquency rates for mortgages backed by commercial and multifamily properties increased slightly through the first quarter of 2023, according to the Mortgage Bankers Association’s (MBA) latest commercial real estate finance (CREF) Loan Performance Survey.

“Delinquency rates for commercial and multifamily mortgages increased for the second straight quarter,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “The rise was led by a 110-basis-point increase in the share of office loan balances that are 30 days or more past due. At the same time, pandemic-fueled delinquency rates for retail and hotel loans continued to tick down.”

Woodwell continued, “Higher and volatile interest rates, coupled with uncertainty about property values and some property fundamentals, are suppressing sales transaction and mortgage origination volumes. Some loans maturing into these conditions are likely to face increased frictions, which is likely to push further on delinquency rates in coming quarters.”

Key Findings from MBA’s CREF Loan Performance Survey for March 2023:

The balance of commercial and multifamily mortgages that are not current increased in December 2022 (compared to September 2022).

97.8% of outstanding loan balances were current or less than 30 days late at the end of the first quarter, down from 98.0% at the end of the fourth quarter of 2022.
1.7% were 90+ days delinquent or in REO, up from 1.6%.
0.2% were 60-90 days delinquent, up from 0.1%.
0.3% were 30-60 days delinquent, unchanged from the previous quarter.
Loans backed by lodging and retail properties continue to see the greatest stress. Both also saw declines in delinquency rates.
5.6% of the balance of lodging loans were 30 days or more delinquent, down from 6.1% at the end of last quarter.
4.6% of the balance of retail loan balances were delinquent, down from 5.4%.
2.7% of the balance of office property loans were delinquent, up from 1.6%.
0.9% of the balance of industrial property loans were delinquent, up from 0.3%.
0.7% of multifamily balances were delinquent, up from 0.5%.
Because of the concentration of hotel and retail loans, CMBS loan delinquency rates are higher than other capital sources.
3.3% of CMBS loan balances were 30 days or more delinquent, up from 3.2% last quarter.
Non-current rates for other capital sources were more moderate.
0.8% of FHA multifamily and health care loan balances were 30 days or more delinquent, unchanged from last quarter.
0.6% of life company loan balances were delinquent, up from 0.4%.
0.3% of GSE loan balances were delinquent, up from 0.2%.