Commercial Mortgage Delinquency Rate Increases Again in Q3

The Mortgage Bankers Association (MBA) reported on Tuesday (12-5-23) that according to its latest Commercial Delinquency Report, the number of commercial mortgage delinquencies increased for the third consecutive quarter in Q3.

The MBA explains that its quarterly analysis looks at commercial delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. Together, these groups hold more than 80% of commercial mortgage debt outstanding.

Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of Q3 were as follows:

• Banks and thrifts (90 or more days delinquent or in non-accrual): 0.85%, an increase of 0.18 percentage points from Q2.
• Life company portfolios (60 or more days delinquent): 0.32%, an increase of 0.18 percentage points from Q2.
• Fannie Mae (60 or more days delinquent): 0.54%, an increase of 0.17 percentage points from Q2.
• Freddie Mac (60 or more days delinquent): 0.24%, an increase of 0.03 percentage points from Q2.
• CMBS (30 or more days delinquent or in REO): 4.26%, an increase of 0.44 percentage points from Q2.

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

“Not unexpectedly, delinquency rates on commercial mortgages increased for the third consecutive quarter. Every major capital source saw delinquency rates rise, driven by higher interest rates, changes in some property market fundamentals, and uncertainty about property values. CRE market activity remains muted, further complicating the situation.

CRE markets are large and heterogeneous. Data from MBA’s own survey released earlier in the quarter show wide differences in mortgage performance by property type. Deal vintage, term, market, and a host of other factors also play into which loans are facing pressure. These differences are likely to remain important in the year ahead.”