Healthy Loan Delinquency Rate Holding Despite 2017’s ‘Wave of Maturities’ Growth in property incomes and property values, coupled with low interest rates, have facilitated financing
The recent performance of loans backing commercial and multifamily properties have again defied expectations and remained on strong footing in the first quarter of 2017, according to the Mortgage Bankers Association, which found that delinquency rates for mortgage loans were flat or decreased in its analysis of the market’s first quarter performance.
“Delinquency rates for commercial and multifamily mortgages remained at or near record lows for most capital sources during the first quarter,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. Woodwell again credited the extended run of increasing property incomes and commercial property values, along with continued low interest rates, in facilitating the recent unprecedented duration of favorable CRE financing conditions.
The financing industry had been expecting loan delinquencies and defaults to increase this year as the so-called ‘wave of maturities’ – 10-year real estate loans originated in the heady, loose-underwriting days of 2007 with 2017 maturity dates – came due. However, as the industry is nearing the end of the second quarter, the ‘wave’ has largely proven to be a mirage.
The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac. Together the MBA said these groups hold more than 80% of commercial/multifamily mortgage debt outstanding.
Based on its analysis of the unpaid principal balance of loans, the MBA reported delinquency rates for each group at the end of the first quarter were as follows:
- Banks and thrifts: a decrease of 0.04 percentage points from the fourth quarter of 2016, (90 or more days delinquent or in non-accrual);
- Life company portfolios: a decrease of 0.02 percentage points from the fourth quarter of 2016; (60 or more days delinquent)
- Fannie Mae (60 or more days delinquent): 0.05%, unchanged from the fourth quarter of 2016.
- Freddie Mac: unchanged from third quarter of 2016; (60 or more days delinquent), and
- CMBS: a decrease of 0.08 percentage points from the fourth quarter of 2016, (30 or more days delinquent or in REO).
