Commercial and multifamily mortgage delinquencies declined in the fourth quarter of 2021, according to the Mortgage Bankers Association‘s (MBA) latest Commercial/Multifamily Delinquency Report.
“Commercial and multifamily mortgage performance continues to normalize, with delinquency rates down or flat for every major investor group,” states Jamie Woodwell, MBA’s vice president of commercial real estate research. “Delinquencies for some sectors appear to remain elevated for one of two reasons. For some, lenders and servicers continue to work-out loans that were hard hit by the pandemic. For others, the method of reporting may classify forborne or other loans as delinquent, even when they are back on track. Delinquency rates are back down to at or near their pre-pandemic levels in the other sectors.”
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, and Fannie Mae and Freddie Mac. Together, these groups hold more than 80% of commercial/multifamily mortgage debt outstanding.
MBA’s 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. As just one example, Fannie Mae reports loans receiving payment forbearance as delinquent, while Freddie Mac excludes those loans if the borrower is in compliance with the forbearance agreement.
Based on the unpaid principal balance (UPB) of loans, the delinquency rate at the end of the fourth quarter of 2021 for banks and thrifts (90 or more days delinquent or in non-accrual) was 0.59%, a decrease of 0.10 percentage points from the third quarter of 2021. For life company portfolios (60 or more days delinquent), it was 0.04%, which was unchanged from the third quarter.
Fannie Mae (60 or more days delinquent) was 0.42% (unchanged from the third quarter) while Freddie Mac (60 or more days delinquent) was 0.08%, a decrease of 0.04% from the third quarter. CMBS (30 or more days delinquent or in REO) was 4.02%, a decrease of 0.84 percentage points from the third 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.
Read the report here.
