MBA: Commercial Loan Delinquencies Near All-time Low

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By Susan A. Baird
PBN Web Editor

Posted Mar. 10, 2008

WASHINGTON –Commercial loan and multifamily mortgage delinquency rates ended 2007 at or near record lows for four of five major investor groups, the Mortgage Bankers Association said in its first Commercial/Multifamily Mortgage Delinquency Rates for Major Investor Groups analysis.

The new analysis compared year-end commercial loan delinquency rates since 1996 for five kinds of investors that account for more than 80 percent of commercial loan and multifamily mortgage debt: commercial mortgage-backed securities (CMBS); life insurance companies; Fannie Mae; Freddie Mac; and commercial banks and thrifts backed by the Federal Deposit Insurance Corporation (FDIC).

Each group tracks delinquencies in its own way, with CMBSs considered delinquent when payment is 30 or more days past due; life insurers, Fannie Mae and Freddie Mac, when payment is 60 or more days past due; and banks and thrifts, when payment is 90 or more days past due.

“While numbers aren’t comparable across different investor groups, within each group they show a common theme: for nearly every investor group, the commercial loan and multifamily loans are currently performing at some of the strongest levels on record,” said Jamie Woodwell, the MBA’s senior director of commercial and multifamily research, said in a statement today.

In the fourth quarter of 2007, the trade group found, delinquency rates for the first four groups were at or near historic lows: For life insurance company portfolios, the rate was 0.01 percent – with only nine delinquent loans, amounting less than $19 million, out of a reported total of $245 billion. For Freddie Mac, the fourth-quarter rate was 0.02 percent. For Fannie Mae, it was 0.08 percent. For commercial mortgage-backed securities, the delinquency rate was 0.40 percent.

Even for the fifth group – the FDIC-insured institutions, which had a delinquency rate of 0.80 percent – the rate of past-due loans was still lower than in five of the previous 11 years and 10 of the previous 16 years, the MBA found.

“This is an important new analysis that helps cut through much of the recent ‘noise’ on commercial loan and real estate finance,” Steve Graves, chair of the MBA’s commercial board of governors and managing director and chief operating officer of Principal Real Estate Investors, said in introducing the report. “Despite a great deal of attention being paid to economic uncertainty, it is reassuring to know that the performance of the commercial loan and multifamily mortgage loans and bonds has remained so fundamentally sound.” The same cannot be said for the residential market, however. U.S. residential foreclosures and foreclosure starts are at their highest rates ever, the MBA said in a report last week.

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