Commercial and Multifamily Mortgage Delinquency Rates Trek Higher in Q3

The Mortgage Bankers Association (MBA) on Friday (10-20-23) reported the results of their latest commercial real estate finance (CREF) Loan Performance Survey. According to the survey, delinquency rates for mortgages backed by commercial and multifamily properties increased during Q3.

The MBA’s CREF Loan Performance Survey collects information on commercial and multifamily mortgage portfolios as of September 30th. This month’s results build on similar surveys conducted by the MBA since April 2020. Participants reported on $2.7 trillion of loans in September, representing 58% of the total $4.6 trillion in commercial and multifamily mortgage debt outstanding (MDO).

The MBA reports that the balance of commercial and multifamily mortgages that are not current increased in September, when compared to June. The breakdown is as follows:

• 97.3% of outstanding loan balances were current or less than 30 days late at the end of Q3, down from 97.7% at the end of Q2.
• 2.2% were 90+ days delinquent or in REO, up from 1.7% in Q2.
• 0.2% were 60–90 days delinquent, unchanged from Q2.
• 0.3% were 30–60 days delinquent, down from 0.4% in Q2.

Adding additional background and his analysis to the report, MBA Head of Commercial Real Estate Research Jaimie Woodwell said:

“The delinquency rate for loans backed by commercial properties has now increased for four consecutive quarters. The delinquency rate for loans backed by office properties now exceeds those of loans backed by retail and hotel properties, while the delinquency rates for multifamily and industrial property loans remain below one percent.

Commercial property markets are working through challenges stemming from uncertainty about some properties’ fundamentals, a lack of transparency into where current property values are, and higher and volatile interest rates. The result has been a slow and steady uptick in delinquency rates, concentrated among loans facing more of those challenges.”