Commercial/Multifamily Delinquencies Continue Improvement

Four out of five of the major groups that invest in commercial/multifamily mortgages saw delinquency rates fall during the second quarter of 2011.  The fifth group, loans held in commercial mortgage backed securities (CMBS) continued to deteriorate, but at a more moderate pace. The delinquency data were reported on Monday by the Mortgage Bankers Association (MBA).

Life insurance companies reported that commercial and multi-family loans that were 60+ days delinquent at the end of the quarter constituted 0.12 percent of their portfolios compared to 0.14 percent at the end of Quarter One and 0.29 percent one year earlier.  FDIC insured banks and thrifts reported a 90+ day delinquency rate of 3.93 percent, down from 4.18 percent in the first quarter and 4.34 percent at the end of Q2 2010.

Both government sponsored enterprises (GSEs), Freddie Mac and Fannie Mae saw improvements in their portfolios as well.  Fannie Mae's 60+ day delinquency rate was .46 percent at the end of the quarter, down from .64 percent last quarter and 0.80 percent one year earlier.  Freddie Mac' 60+ day rate was 0.31 percent, substantially higher than the 0.22 percent one year ago but down from the recent peak of 0.36 percent established in the first quarter of 2011. 

Commercial and multifamily mortgages held in CMBS continue to set records for 30+ day delinquencies, establishing a new high of 9.43 percent in Quarter two.  This was an increase of 25 basis points from the 9.18 percent level in Q1.  Prior to the beginning of this year the rate had risen rapidly each quarter - from 0.39 percent at the end of 2007 to 8.95 percent at the end of 2010.

Jamie Woodwell, MBAs Vice President of Commercial Real Estate Research said that the delinquency rates for banks, life insurance companies and two GSEs remain below levels seen in the last major real estate downturn in the early 1990s, some by wide margins.  "The delinquency rate for loans held in CMBS continued to rise during the second quarter and reached the highest level since the series began in 1997, although the rate of increase continues to moderate."

Commercial and multifamily loans as defined by the report do not include construction and development loans although the banks and thrifts data does include owner-occupied commercial properties.  MBA cautions that, because each investor group tracks delinquencies in its own way, rates are not comparable from one group to another.