US Commercial Mortgage Delinquency Rate Increases in Q1

On Tuesday, the Mortgage Bankers Association (MBA) reported that according to its latest Commercial Delinquency Report, commercial mortgage delinquencies increased in Q1.

The MBA’s 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. MBA’s analysis incorporates the measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another.

Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of Q1 were as follows:

• Banks and thrifts (90 or more days delinquent or in non-accrual): 1.03%, an increase of 0.09 percentage points from 2023Q4.
• Life company portfolios (60 or more days delinquent): 0.52%, an increase of 0.16 percentage points from 2023Q4.
• Fannie Mae (60 or more days delinquent): 0.44%, a decrease of 0.02 percentage points from 2023Q4.
• Freddie Mac (60 or more days delinquent): 0.34%, an increase of 0.06 percentage points from 2023Q4.
• CMBS (30 or more days delinquent or in REO): 4.35%, an increase of 0.05 percentage points from 2023Q4.

In remarks accompanying the report, MBA’s Head of Commercial Real Estate Research Jamie Woodwell said:

“Commercial mortgage delinquency rates continued to increase during the first three months of 2024. The increase was seen across most capital sources, pointing to the challenges caused by loans that are maturing amid higher interest rates, uncertain property values, and questions about some properties’ fundamentals.

It is important to recognize that different capital sources track delinquencies in different ways—and with good reason. The rise in delinquency rates for commercial mortgages at banks was driven by banks designating non-multifamily loans—in particular, office—as ‘nonaccrual,’ meaning the loan may still be current on payments, but the lender does not expect to be paid in full. The increases in such loans, and the associated net-charge-offs at large banks, can be seen as evidence of the institutions working to get ahead of potential future defaults.”