Commercial and multi-family delinquencies slide to new pandemic low

Commercial and multi-family mortgage defaults fell to a new pandemic low in May, according to the Mortgage Bankers Association.

“Commercial and multi-family mortgage default rates fell last month to the lowest level since the start of the COVID-19 pandemic,” said Jamie Woodwell, vice president of commercial real estate research at MBA. “Pockets of high stress remain in housing and retail property-backed loans, dragged down by loans in the late stages of delinquency and foreclosure or REO. Quarterly measures of delinquency rates between the fourth quarter of last year and the first quarter of this year show a decline in distress in almost all sources of capital.

The results of the recent MBA survey showed that 95.2% of overdue loan balances were up to date, a slight improvement from 95.1% in April. Only 3.1% of commercial and multi-family mortgages remained in arrears over 90 years or in REO in May, compared to 3.2% the month before.

By type of property, housing and retail loans continue to be under the most stress. The home loan default rate fell to 20%, while personal loan defaults increased to 9.5% month over month. Defaults on mortgages backed by most other types of properties remained low. The share of non-current industrial mortgages remained unchanged at 1.9%, and the share of delinquent office mortgages fell to 2.4% in May.

The default rates among the five largest investor groups were as follows:

• Banks and savings (90 days or more past due or not regularized): 0.80%, down 0.03% compared to the fourth quarter of 2020;

• Life company portfolios (60 days or more late): 0.10%, down 0.06% from the fourth quarter;

• Fannie Mae (60 days or more late): 0.66%, down 0.32% from the fourth quarter;

• Freddie Mac (60 days or more late): 0.17%, up 0.01% from the fourth quarter; and

• CMBS (30 days or more late or in REO): 6.30%, down 1.20% from the fourth quarter.

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