Commercial MBS Delinquencies Rise in Third Quarter

While residential foreclosures get most of the publicity, delinquency rates for mortgages in the commercial sector are also rising according to data released today by the Mortgage Bankers Association (MBA).

MBA's Commercial/Multifamily Delinquency Report tracks commercial delinquencies among five investor groups, each of which reports its delinquencies in its own way.  Therefore, rates are not comparable from group to group. 

During the third quarter the 30+ day delinquency rate for loans held in commercial mortgage-backed securities (CMBS) rose .17 percentage points to 4.06 percent during the quarter.  Mortgages held by life insurance companies that are 60 or more days delinquent were up 0.08 percentage points to 0.23 percent and the 60+ day rate on multifamily loans in Fannie Mae's portfolio increased by 0.11 percentage points to 0.62 percent.  Mortgages in FDIC-insured banks and thrifts were up 0.51 basis points to 3.43 percent and multi-family loans held by Freddie Mac were unchanged from the second quarter at 0.11 percent.

The CMBS figures include mortgages in foreclosure and are the only ones to include real estate owned in both the numerator and denominator of the computation.  CMBS loans include all "private label" non-Ginnie Mae, Fannie Mae, and Freddie Mac issued loans that are currently outstanding.  Life Insurance, Fannie Mae and Freddie Mac owned loans include those in foreclosure.  The FDIC loans also include foreclosures and have a large number of "owner occupied" commercial loans in which the loan is supported by the income of the resident business rather than through rentals.  None of the figures in the Association's report include construction and development loans.

"Commercial and multifamily mortgages continued to feel stress in the face of the weakened economy," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "The deterioration in commercial and multifamily loan performance is generally in line with what is being seen in other parts of the economy, with loans backed by commercial properties continuing to perform far better than construction and development loans."

The increases in several portfolios since the end of the second quarter are significant, however, the impact of the current problems become more apparent if the third quarter results are measured year over year.  Here are the comparisons for each of the portfolios current delinquency rates with those reported at the end of the third quarter of 2008.