Commercial Loan Delinquency Rates Shoot to Record Highs

Commercial real estate mortgages held in commercial mortgage backed securities (CMBS) have skyrocketed in the past year and have reached an all time high according to the Mortgage Bankers Association's (MBA) Commercial/Multifamily Delinquency Report.  Delinquencies in other investor groups, while up, are still well below numbers in the early 1990s.

Between the fourth quarter 2009 and first quarter 2010, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 1.54 percentage points from 5.70 percent to 7.24 percent.  However, since the first quarter of 2009 the rate has increased nearly four-fold. Seen on a graph, the delinquency pattern over the last 12 months has a vertical trajectory, rising from 1.86 percent to the current number.   

The MBA report looks at the commercial and multi-family delinquency rates in the five largest investor groups; commercial banks and thrifts, CMBS, life insurance companies, Freddie Mac, and Fannie Mae.  More than 80 percent of all outstanding commercial and multifamily mortgages are held by members of these five groups.  Because each group has a different composition of loans in its portfolio and tracks delinquencies in its own way, comparisons cannot be made from group to group.

Since the fourth quarter of 2009, the 60+ day delinquency rate on loans held in life company portfolios increased 0.12 percentage points to 0.31 percent and the 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.16 percentage points to 0.79 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.05 percentage points to 0.24 percent.  The 90+ day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.32 percentage points to 4.24 percent.

"Weakness in the economy has continued to weigh on commercial properties, which in turn weighs on the mortgages they back," said Jamie Woodwell, MBA's 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."