During the fourth quarter of 2010, commercial and multifamily mortgage delinquency rates remained low for life insurance companies, Fannie Mae and Freddie Mac; fell for banks and thrifts for the first time since the 2006 and rose slightly for loans held in commercial mortgage-backed securities (CMBS), according to the Mortgage Bankers Association's (MBA) Commercial/Multifamily Delinquency Report.
The delinquency rate for loans held in CMBS is the highest since the series began in 1997. Delinquency rates for other groups remain below levels seen in the last major real estate downturn during the early 1990s, some by large margins.
"The recession's downward pull on commercial and multifamily mortgage performance has slackened," said Jamie Woodwell, MBA's vice president of commercial real estate research. "The delinquency rates for commercial and multifamily mortgages at banks and thrifts appear to have peaked at levels well below those of the last recession, and the performance of loans held by life companies, Fannie Mae and Freddie Mac has been relatively strong throughout the downturn. The CMBS market has continued to see elevated levels of stress - although the rate of increase has moderated and some technical issues make a direct comparison of CMBS to other investor groups tricky."
Between the third and fourth quarters of 2010, the 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts decreased 0.22 percentage points to 4.19 percent— the first decrease since the first quarter of 2006. The 30-plus day delinquency rate on loans held in CMBS increased 0.37 percentage points to 8.95 percent. The 60-plus day delinquency rate on loans held in life company portfolios decreased 0.03 percentage points to 0.19 percent. The 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae increased 0.06 percentage points to 0.71 percent. The 60-plus day delinquency rate on multifamily loans held or insured by Freddie Mac decreased 0.04 percentage points to 0.31 percent.
The fourth quarter 2010 delinquency rate for commercial and multifamily mortgages held by banks and thrifts was 2.39 percentage points lower than the series high (of 6.58 percent reached in the second quarter of 1991). The rate for loans held in CMBS was a record high for the series. The delinquency rate for commercial and multifamily mortgages held in life insurance company portfolios was 7.18 percentage points lower than the series high (of 7.37 percent reached during the fourth quarter of 1993); the rate for multifamily loans held by Fannie Mae rate was 2.91 percentage points below the series high of 3.62 percent (reached during the fourth quarter of 1991); and the rate for multifamily loans held by Freddie Mac was 6.50 percentage points lower than the series high (of 6.81 percent reached in 1992).
Construction and development loans are not included in the numbers presented here, but are included in many regulatory definitions of 'commercial real estate' despite the fact that 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 banks and thrifts reported here do include loans backed by owner-occupied commercial properties.
The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac. Together these groups hold more than 85 percent of commercial/multifamily mortgage debt outstanding.
The analysis incorporates the same 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.
Based on the unpaid principal balance of loans (UPB), delinquency rates for each group at the end of the fourth quarter were as follows:
►CMBS: 8.95 percent (30-plus days delinquent or in REO);
►Life company portfolios: 0.19 percent (60+days delinquent);
►Fannie Mae: 0.71 percent (60 or more days delinquent)
►Freddie Mac: 0.31 percent (60 or more days delinquent); and
►Banks and thrifts: 4.19 percent (90 or more days delinquent or in non-accrual).
For more information, visit www.mortgagebankers.org.