Delinquency rates for American mortgages backed by commercial and multifamily properties increased for the second month in a row in December, according to the Mortgage Bankers Association’s latest monthly report.

The rate rose from 5.7 percent in November to 6 percent in December. The increase was driven by more loans becoming newly delinquent, the association said. Participants in the survey reported on $1.9 trillion of loans in October, representing approximately half of the total $3.8 trillion in commercial and multifamily mortgage debt outstanding.

“The increase in commercial and multifamily mortgage delinquencies in December is a symptom of the economic slowdown stemming from the recent surge in COVID-19 cases,” MBA Vice President of Commercial Real Estate Research Jamie Woodwell said in a statement. “Delinquencies initially jumped in April and May, driven by the impact the pandemic had on lodging and retail properties. For several months, delinquency rates declined as the economy stabilized. But more recently, the added stress from a winter wave of the virus has weakened the economy and challenged some owners, as property income has been disrupted. The roll-out of multiple COVID-19 vaccines is good news for the long-term, but last month’s rise in commercial mortgage delinquencies reinforces that many challenges remain between now and when the economy can fully reopen.”

Of commercial and multifamily mortgages, 3.5 percent were 90 or more days delinquent or were for bank-owned properties, unchanged from a month earlier, while 1.5 percent were less than 30 days delinquent, up from 1 percent in November. The share of loans that were 30 to 60 days delinquent and 60 to 90 days delinquent were unchanged from one month earlier.

Loans backed by lodging and retail properties continue to see the greatest stress, the MBA said. The overall share of lodging, office and industrial loan balances that are delinquent increased in December, with 22.5 percent of lodging loans were not current in December, up from 22.1 percent in November. The delinquency rate of retail real estate loans improved in December, dropping from 12.9 percent to 11.9 percent.

Delinquency rates for mortgages on industrial and office properties showed notable increases, with the former rising from 2.5 percent in November to 4.2 percent in December and the latter increasing from 2.4 percent to 2.7 percent between the two months.

Multifamily properties remained the healthiest, with the delinquency rate rising slightly from 1.6 percent in November to 1.7 percent in December.

Overall, CMBS loan delinquency rates were up relative to other capital sources, thanks to a concentration of hotel and retail loans:

  • 10.5 percent of CMBS loan balances were non-current in December, up from 10.4 percent in November.
  • Non-current rates for other capital sources were more moderate and mixed.
  • 2.6 percent of FHA multifamily and health care loan balances were non-current, down from 2.8 percent in November.
  • 1.9 percent of life company loan balances were non-current, up from 1.7 percent in November.
  • 1.3 percent of GSE loan balances were non-current, flat from November.

Commercial, Multifamily Delinquencies Up for Second Month

by Banker & Tradesman time to read: 2 min