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MBA Report Shows Economic Weakness Continues to Weigh on Commercial Mortgage Performance

Delinquency rates continued to increase in the first quarter for all commercial/multifamily mortgage investor groups, according to the Mortgage Bankers Associations(MBA) Commercial/Multifamily landlord helpDelinquency Report.

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

Weakness in the economy has continued to weigh on commercial properties, which in turn weighs on the mortgages they back, said Jamie Woodwell, MBAs Vice President of Commercial Real Estate Research. Economic growth, specifically in areas of jobs and consumer spending, will be key to stabilizing the commercial property and mortgage markets going forward.
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, 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 first quarter were as follows:

¢ CMBS: 7.24 percent (30+ days delinquent or in REO);
¢ Life company portfolios: 0.31 percent (60+days delinquent);
¢ Fannie Mae: 0.79 percent (60 or more days delinquent)
¢ Freddie Mac: 0.24 percent (60 or more days delinquent);
¢ Banks and thrifts: 4.24 percent (90 or more days delinquent or in non-accrual).

To view the report, please click here.

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