Commercial Property Deliquency Rates on the Rise

June 29, 2010

Delinquency rates for commercial mortgages held by banks, thrifts, and life companies rose in the first quarter, the Mortgage Bankers Association reports.

“Weakness in the economy has continued to weigh on commercial properties, which in turn weighs on the mortgages they back,” says Jamie Woodwell, vice president of commercial real estate research at the mortgage bankers group. “Economic growth, specifically in areas of jobs and consumer spending, will be key to stabilizing the commercial property and mortgage markets going forward.”

The delinquency rate for loans held in commercial mortgage-backed securities (CMBS) reached the highest level since 1997, according to the report issued this week. Between the fourth quarter of 2009 and the first quarter of 2010, the delinquency rate of CMBS loans at least 30 days overdue rose 1.54 percentage points to 7.24%, according to the mortgage bankers.

Meanwhile, the delinquency rate of loans at least 60 days overdue and held in life company portfolios rose 0.12 percentage points to 0.31%. The rate of multifamily loans at least 60 days delinquent and held or insured by Fannie Mae rose 0.16 percentage points to 0.79%.

At the same time, the delinquency rate of multifamily loans at least 60 days late that were held or insured by Freddie Mac increased 0.05 percentage points to 0.24%. And the 90-day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.32 percentage points to 4.24%.

The analysis looked at commercial real estate delinquency rates for five of the largest investor-groups: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac. Altogether, the groups hold more than 80% of outstanding commercial mortgage debt.

Construction and development loans were not included in the delinquency numbers.

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