Trepp: Delinquencies Improving Slowly

Trepp has come out with preliminary estimates for third quarter real estate and business loan delinquencies.  While final reports from banks will not be available until the end of the month, Trepp has pulled together its figures from small bank earnings reports and call report filings.   

The overall delinquency rate for single-family mortgages edged down to an estimated 12.0 during the third quarter from 12.3 percent in the second quarter and 13.1 percent a year ago and seriously delinquent loans (non-accrual rates) will be at 5 percent, the same level as the fourth quarter of 2009.   Trepp says the situation is improving only slowly because of the high volume of foreclosure and weak price trends.  "Recovery in the market looks like it will take a protracted period of time, probably measured in years rather than weeks or months."

Commercial mortgage delinquencies will fall to an estimated 4.6 percent from 4.9 percent in Quarter Two and the nonaccrual rate will decline to an estimated 3.4 percent.  The rate of improvement in Quarter Three was slower than in the previous quarter because efforts by lenders to shed nonperforming assets are being hampered by a weaker economy.

The delinquency rate for non-real estate commercial loans is estimated at 1.9 percent compared to 2.2 percent the previous quarter, the first time this rate has been below 2 percent since the fourth quarter of 2008.  The delinquency rate for construction lending is also retreating and is estimated to be at 15.6 percent in the third quarter, the lowest rate since the first quarter of 2009.  Early results indicate that most of the improvement is in the residential construction sector; there was little change in land and commercial construction delinquencies.