Delinquency Rate for Mortgages Backed by Commercial Properties Increases in 2023Q4

The Mortgage Bankers Association (MBA) reported on Tuesday (1-16-24) that according to data from its latest commercial real estate finance (CREF) Loan Performance Survey, during 2023Q4 the delinquency rate for mortgages backed by commercial properties increased from 2023Q3. MBA noted that loans on office properties drove most of the increases.

MBA provided the following details:

• At the end of Q4, the share of outstanding loan balances that were current or less than 30 days late was 96.8%, up from 97.3% at the end of Q3.
• At the end of Q4, the share of outstanding loan balances that were 90+ days delinquent or in REO was 2.3%, up from 2.2% at the end of Q3.
• At the end of Q4, the share of outstanding loan balances that were 60–90 days delinquent was 0.3%, up from 0.2% at the end of Q3.
• At the end of Q4, the share of outstanding loan balances that were 30–60 days delinquent was 0.6%, up from 0.3% at the end of Q3.

Commenting on the results of the CREF Loan Performance Survey, MBA Head of Commercial Real Estate Research Jamie Woodwell said:

“Ongoing challenges in commercial real estate markets pushed the delinquency rate on CRE-backed loans higher in the final three months of 2023. Delinquency rates jumped to 6.5% of balances for loans backed by office properties and to 6.1% for lodging-backed loans. Delinquencies for loans backed by retail properties remain elevated from the onset of the pandemic but were unchanged during the quarter. Delinquency rates for multifamily and industrial property loans both increased marginally but remain much lower.

Long-term interest rates have come down from their highs of last year, which should provide some relief to some loans, but many properties and loans still face higher rates, uncertainty about property values and—for some properties—changes in fundamentals. Each loan and property faces a different set of circumstances, which will come into play as the market works through loans that mature this year.”