Commercial and multifamily mortgage performance stabilizes

However, lodging and retail sectors continue to report high rates of delinquencies

Commercial and multifamily mortgage performance stabilizes

Commercial and multifamily mortgage performance has started to slowly recover from the strain caused by the coronavirus pandemic, according to the Mortgage Bankers Association.

Delinquency rates for mortgages backed by commercial and multifamily properties were down slightly in September, MBA's CREF Loan Performance Survey showed.

The survey – which was developed to understand how COVID-19 is affecting commercial mortgage loan performance – revealed that the share of commercial and multifamily loan balances that were current rose from 93.6% in August to 94.3% in September.

The share of loans less than 30 days delinquent declined from 1.6% to 0.9% month over month. However, those that are 90+ days delinquent ticked up from 2.9% to 3%.

"Commercial and multifamily mortgage performance has stabilized, and in many cases, has begun to slowly improve since the initial stress of April and May," said Jamie Woodwell, vice president of commercial real estate research at MBA.

Despite the improvements, delinquency rates were still high in the lodging and retail sectors. The balance of lodging loans that were delinquent in September fell to 22.1% from 23.5% the month before. The balance of delinquent retail loans also posted a drop, down from 15% in August to 13.3% in September.

Delinquency rates among property types were as follows:

  • 4.4% of health care loan balances were delinquent, down from 4.7% in August
  • 2.7% of industrial loan balances were delinquent, down from 3.4% in August
  • 2.1% of office loan balances were delinquent, down from 2.4% in August
  • 1.7% of multifamily loan balances were delinquent, down from 1.9% in August

Delinquency rates among capital sources were as follows:

  • 10.9% of the balance of CMBS loans was delinquent in September, down from 12.5% in August
  • 2.6% of FHA loan balances were delinquent, up from 2.4% in August
  • 1.9% of life company loan balances were delinquent, down from 2.4% in August
  • 1.3% of GSE loan balances were delinquent (unchanged from August)

"Lodging and retail properties felt the onset of the recession almost immediately and dramatically, and that continues to show in the numbers," Woodwell said. "Delinquency rates remain more muted among other property types, and overall, the inflow of newly delinquent loans has slowed to one-fourth the rate seen in April."

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