Did commercial and multifamily mortgages continue to perform well in Q3?
Delinquency rates of commercial and multifamily mortgages hovered near record lows in the third quarter of 2022 despite a challenging market environment.
In its latest report, data from the Mortgage Bankers Association revealed that the commercial and multifamily delinquency rates for five of the largest investor groups (commercial banks and thrifts, commercial mortgage-backed securities [CMBS], life insurance companies, and Fannie Mae and Freddie Mac) stayed low in Q3. According to MBA, these groups hold more than 80% of commercial/multifamily mortgage debt outstanding.
Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of Q3 2022 were as follows:
- Banks and thrifts (90 or more days delinquent or in non-accrual): 0.44%, down 0.05 percentage points from the second quarter of 2022
- Life company portfolios (60 or more days delinquent): 0.09%, up 0.05 percentage points quarter over quarter
- Fannie Mae (60 or more days delinquent): 0.26%, down 0.08 percentage points quarter over quarter
- Freddie Mac (60 or more days delinquent): 0.13%, up 0.06 percentage points quarter over quarter
- CMBS (30 or more days delinquent or in REO): 2.77%, down 0.18 percentage points quarter over quarter
“The share of bank-held CRE loan balances that were delinquent has only been lower once – just before the onset of the COVID-19 pandemic – in the series’ 30-year history,” said Jamie Woodwell, head of commercial real estate research at MBA.
However, even the booming commercial and multifamily sectors are not bulletproof from rising interest rates, inflation, and a looming recession. Woodwell warned that these factors may reverse the commercial/multifamily delinquency downtrend.
“The conditions that pushed delinquency rates to these near-record lows have been shifting, and we expect to see some stress work its way back into some loans,” he said. “Very slight increases during the third quarter in the delinquency rates of life company and Freddie Mac loans may signal the beginning of these trends.”
