Hard-hit CMBS market sees a spike in delinquency rates
Most commercial and multifamily mortgages are still performing well despite the coronavirus crisis, the Mortgage Bankers Association’s latest quarterly Commercial/Multifamily Delinquency Report showed.
"The onset of the COVID-19 pandemic had a dramatic and immediate impact on lodging and retail properties, which flowed through to the mortgages backed by those properties and led to a spike in delinquency rates in April and May," said Jamie Woodwell, vice president of commercial real estate research. "While delinquency rates for both hotel and retail properties have since stabilized – and even declined slightly in July and August for hotel-backed loans – they still remain elevated. Overall, the vast majority of the balance of loans backed by other major property types continues to perform well."
Approximately 93.6% of commercial and multifamily mortgage balances were current as of August 20, down slightly from 93.8% in the month before.
Commercial mortgage-backed securities (CMBS) posted the greatest increase in delinquencies in the past few months. After a 0.9% drop in July, CMBS delinquencies climbed again to 12.6% in August.
Delinquencies for other capital sources, on the other hand, were relatively low and stable: 97.5% of FHA loan balances were current (unchanged from July), as were 97.7% of life company balances (up from 97.4% a month earlier) and 98.7% of GSE multifamily loan balances (flat from the previous month).
By property types, delinquency rates for retail loans hit a new record high, up from 13.9% in July to 15% in August. Meanwhile, lodging loan delinquencies fell for the second straight month, down from 26.2% to 23.4% month over month.
Delinquencies of mortgages backed by most other major property types remained low. The share of apartment loans that were current rose from 98.1% to 98.3%, as were 97.8% of office loan balances (higher than the 97.5% last month), and 96.7% of industrial loans in August (lower than the 98.3% in July).
"The property-specific differences flow through to the major capital sources. The commercial mortgage-backed securities (CMBS) market, which has the greatest reliance on hotel and retail loans, has seen delinquency rates rise to record highs," Woodwell said. "Meanwhile, the delinquency rates for other capital sources has also increased, but not to the same degree, with many remaining closer to all-time lows than record highs."
