Commercial and Multifamily Loan Delinquencies Remain Low; Re-finance Threat Stays Elevated

Healthy Loan Delinquency Rate Holding Despite 2017’s ‘Wave of Maturities’ Growth in home incomes and property values, paired with low interest rates, have assisted in financing

The current performance of loans backing commercial and multifamily residential or commercial properties have once again defied expectations and stayed on strong footing in the first quarter of 2017, inning accordance with the Mortgage Bankers Association, which discovered that delinquency rates for home loan were flat or reduced in its analysis of the market’s first quarter performance.

“Delinquency rates for commercial and multifamily home mortgages stayed at or near record lows for most capital sources throughout the first quarter,” stated Jamie Woodwell, MBA’s vice president of commercial real estate research. Woodwell again credited the extended run of increasing residential or commercial property incomes and commercial residential or commercial property values, together with ongoing low rate of interest, in helping with the recent unmatched period of favorable CRE funding conditions.

The financing market had been anticipating loan delinquencies and defaults to increase this year as the so-called ‘wave of maturities’ – 10-year realty loans come from the heady, loose-underwriting days of 2007 with 2017 maturity dates – came due. Nevertheless, as the industry is nearing the end of the 2nd quarter, the ‘wave’ has mostly shown to be a mirage.

The MBA analysis looks at commercial/multifamily delinquency rates for 5 of the largest investor-groups: business banks and thrifts, business mortgage-backed securities (CMBS), life insurance coverage business, Fannie Mae and Freddie Mac. Together the MBA stated these groups hold more than 80% of commercial/multifamily home mortgage debt outstanding.

Based on its analysis of the unsettled principal balance of loans, the MBA reported delinquency rates for each group at the end of the very first quarter were as follows:

Banks and thrifts: a reduction of 0.04 portion points from the fourth quarter of 2016, (90 or more days overdue or in non-accrual);
Life business portfolios: a reduction of 0.02 percentage points from the 4th quarter of 2016; (60 or more days delinquent)
Fannie Mae (60 or more days overdue): 0.05%, unchanged from the 4th quarter of 2016.
Freddie Mac: the same from third quarter of 2016; (60 or more days delinquent), and
CMBS: a decline of 0.08 portion points from the 4th quarter of 2016, (30 or more days delinquent or in REO).

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