Commercial and multifamily mortgage delinquencies remained low at the end of the first quarter of 2020, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Delinquency Report.
“This year’s first quarter marked the end of a long period of extraordinarily low and stable delinquency rates for commercial and multifamily mortgages,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “With the onset of the COVID-19 pandemic and our social and economic responses to it, more recent data from MBA and others show increasing pressure on delinquency rates, particularly for loans backed by hotel and retail properties – where the impacts have been most immediately and dramatically felt.”
To reflect current market conditions during the ongoing pandemic, MBA will be releasing numbers in late June covering commercial and multifamily loan performance in the second quarter.
MBA’s quarterly delinquency analysis incorporates the 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. For example, the bank delinquency data reported represents the share of banks’ loan balances that are reported 90+ days delinquent or in non-accrual. The balance of bank loans reported delinquent fell between the first and second quarter of 2020, but with the onset of the virus and banks’ actions assessing and altering loans, an increased balance of loans was characterized as non-accrual.
MBA’s quarterly 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.
Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the first quarter of 2020 were as follows:
- Banks and thrifts (90 or more days delinquent or in non-accrual): 0.51 percent, an increase of 0.09 percentage points from the fourth quarter of 2019;
- Life company portfolios (60 or more days delinquent): 0.04 percent, unchanged from the fourth quarter;
- Fannie Mae (60 or more days delinquent): 0.05 percent, an increase of 0.01 percentage points from the fourth quarter;
- Freddie Mac (60 or more days delinquent): 0.08 percent, unchanged from the fourth quarter; and
- CMBS (30 or more days delinquent or in REO): 1.79 percent, a decrease of 0.28 percentage points from the fourth quarter.
Construction and development loans are generally not included in the numbers presented in this report, but are included in many regulatory definitions of ‘commercial real estate’ despite the fact 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.