Commercial mortgage delinquency rates trend downward in fourth quarter

Delinquency rates for commercial and multifamily mortgage transactions declined in the fourth quarter of 2021, receding for three of the five investor groups tracked by the Mortgage Bankers Association (MBA).

At the end of 2021, the delinquency rate for banks and thrifts was 0.59%, down 0.1 percentage points from the previous quarter. For life company portfolios, the delinquency rate was 0.04%, while for Fannie Mae, it was 0.42%. Both of these rates were unchanged from the third quarter of last year. Freddie Mac’s delinquency rate stood at 0.08%, down 0.04 percentage points quarterly, and for commercial mortgage-backed securities (CMBS), delinquency was at 4.02%, a quarterly decrease of 0.84 percentage points.

Collectively, these five investor groups hold more than 80% of all outstanding commercial and multifamily debt. It’s important to note that the MBA’s analysis uses each group’s definition of “delinquency” to track the performance of their loans, so the individual delinquency rates are not comparable to one another. Banks and thrifts, for example, count loans 90 or more days past due or in nonaccrual as “delinquent.” CMBS delinquency is defined as 30 or more days past due or those that are real estate owned. Life company portfolios and the two government-sponsored enterprises include loans 60 or more days past due in their delinquency rates.

Other, more detailed differences also exist. For example, Fannie reports loans in forbearance as delinquent, but Freddie does not as long as the borrower is in compliance with the forbearance agreement.

Whatever the metric, commercial loan delinquencies are trending in a positive direction, according to Jamie Woodwell, MBA’s vice president of commercial real estate research. For life companies, banks and thrifts, and Freddie Mac, delinquency rates are firmly near the bottom of their historical ranges since 1996. Fannie’s Q4 2021 delinquency rate is closer to the middle of its historical range. Delinquency rates for CMBS loans have the largest variance over the past 26 years, fluctuating between roughly 9.5% and 0.5%, with the Q4 2021 rate below the midpoint of that span.

“Commercial and multifamily mortgage performance continues to normalize, with delinquency rates down or flat for every major investor group,” Woodwell said. “Delinquencies for some sectors appear to remain elevated for one of two reasons.

“For some, lenders and servicers continue to work out loans that were hard hit by the pandemic. For others, the method of reporting may classify forborne or other loans as delinquent, even when they are back on track. Delinquency rates are back down to at or near their pre-pandemic levels in the other sectors.”


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