Commercial Real Estate and Multifamily Mortgage Delinquencies Trend Higher in Q3

On Tuesday, the Mortgage Bankers Association (MBA) reported that according to its latest quarterly commercial real estate finance (CREF) Loan Performance Survey, the delinquency rates for mortgages backed by commercial properties increased slightly during Q3.

MBA’s CREF Loan Performance survey collected information on commercial and multifamily mortgage portfolios as of September 30th. This quarter’s results build on similar surveys conducted since April 2020. Participants reported on $2.6 trillion of loans in September, representing 56% of the total $4.7 trillion in commercial and multifamily mortgage debt outstanding (MDO).

The balance of commercial mortgages that are not current increased slightly in Q3. Below is a breakout by loan type and delinquency:

• 96.8% of outstanding loan balances were current or less than 30 days late at the end of the quarter, down from 97.0% the previous quarter.
• 2.7% were 90+ days delinquent or in REO, up from 2.5% the previous quarter.
• 0.3% were 60-90 days delinquent, up from 0.2% the previous quarter.
• 0.3% were 30-60 days delinquent, down from 0.4% the previous quarter.
• The share of loans that were delinquent increased for some property types, particularly office, and decreased for industrial, lodging, and retail properties.
• 7.8% of the balance of office property loan balances were 30 days or more days delinquent, up from 7.1% at the end of last quarter.
• 5.6% of the balance of lodging loans were delinquent, down from 5.8% the previous quarter.
• 3.8% of retail balances were delinquent, down from 4.5%.
• 1.2% of multifamily balances were delinquent, up from 1.1%.
• 0.6% of the balance of industrial property loans were delinquent, down from 0.8%.
• Among capital sources, CMBS loan delinquency rates saw the highest levels but were flat during the quarter.
• 4.8% of CMBS loan balances were 30 days or more delinquent, unchanged from the last quarter.
• Non-current rates for other capital sources remained more moderate.
• 0.9% of FHA multifamily and health care loan balances were 30 days or more delinquent, unchanged during the quarter.
• 0.9% of life company loan balances were delinquent, down from 1.0%.
• 0.5% of GSE loan balances were delinquent, up from 0.4% the previous quarter.

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

“Delinquency rates for commercial mortgages backed by office properties continued to increase during the third quarter but declined for loans backed by lodging, retail and industrial properties. The commercial mortgage market is large and diverse, covering a range of property types, sizes and ages, geographic markets and submarkets, borrower types, vintages, and more. Each of those differences is affecting loan performance, some to the good and some to the bad.”