Rise in commercial delinquencies has nuances by sector

Rise in commercial delinquencies has nuances by sector

Commercial mortgage delinquencies are increasing regardless of investor type, according to the Mortgage Bankers Association’s most recent quarterly report.

“Every major capital source saw delinquency rates rise,” said Jamie Woodwell, MBA’s head of commercial real estate research, in the third quarter report, which tracks numbers for banks and thrifts combined, life insurers, Fannie Mae, Freddie Mac and securitizations.

But there are nuances to the trend, which has been driven by higher interest rates and vacancies in office properties that have persisted since the pandemic forced many into remote work.

“Deal vintage, term, market, and a host of other factors also play into which loans are facing pressure,” Woodwell added.

Comparisons across capital sources are difficult because of variations in how the metric is tracked in different parts of the market. Even similar entities like Fannie Mae and Freddie Mac have disparities. Fannie records loans in forbearance as delinquent. Freddie excludes them.

Freddie recorded a 0.24% 60-plus days delinquency rate for the third quarter, up 0.03 percentage points from the second. Fannie’s equivalent number was 0.54%, representing a 0.17 percentage-point increase.

Life companies, which also measure delinquencies based on the rate at which loans are 60 or more days late, saw their number rise by 0.18 percentage points to 0.32%.

Based on the share of commercial mortgages 90-plus days late or in nonaccrual status, bank and thrift delinquencies also rose 0.18 percentage points with their number rising to 0.85%.

Commercial mortgage-backed securities, for which late payments get measured based on loans either late by 30-plus days or in real-estate owned status, had a 4.26% delinquency rate, up 0.44 percentage points from the previous quarter.

Data used in the MBA’s analysis comes from sources that include Trepp LLC, the American Council of Life Insurers, Fannie Mae, Freddie Mac, their regulator, and the Federal Deposit Insurance Corp. 

Originally Appeared Here

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Caroline Vega combines over a decade of digital strategy expertise with a deep passion for journalism, originating from her academic roots at Louisiana State University. As an editor based in New Orleans, she directs the editorial narrative at Commercial Lending News, where she crafts compelling content on commercial lending. Her unique approach weaves her background in finance and digital marketing into stories that not only inform but also drive industry conversations forward.