Commercial, Multifamily Mortgage Delinquencies Continue to Vary by Property Types
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The Mortgage Bankers Association is reporting this week the default rates for mortgages covered by commercial real estate and apartment buildings in the U.S. for February 2021, as the impact of the COVID-19 pandemic on commercial and multi-family mortgage performance, depending on the type of commercial property continue to vary.
The summary of the results is from MBA’s CREF (Commercial Real Estate Finance) survey in February and the latest crime / multi-family crime report for the fourth quarter of 2020. The CREF Credit Performance Survey is designed to measure the impact of the pandemic better understand commercial mortgage loan performance. MBA’s regular quarterly analysis of commercial and multi-family home crime rates is based on third-party figures covering each of the major sources of capital.
“After a slight deterioration in late 2020, commercial and multi-family mortgage performance improved for the second straight year in February, bringing the crime rate down to its lowest level since April 2020,” said Jamie Woodwell, vice president of commercial real estate research at MBA. “Home and retail property loans remain the worst, but the proportions of outstanding loan balances that are in arrears have fallen from their highs by 25 percent and 28 percent, respectively. For all types of property, the proportion of outstanding balances is re-emerging. Crime is also the lowest since the pandemic started and less than a quarter of the level as of April 2020. “
Key Findings of the MBA’s CREF Loan Performance Survey for February 2021:
The balance between commercial and multi-family mortgages, which are currently out of date, fell in February to its lowest level since April 2020.
- 94.8% of the outstanding loan balances were current, up from 94.3% in January.
- 3.5% had been a criminal or in REO for more than 90 days, compared to 3.6% in the previous month.
- 0.3% were 60-90 days behind schedule, unchanged from a month earlier.
- 0.6% were 30-60 days behind schedule, unchanged from a month earlier.
- 0.8% were less than 30 days behind schedule, compared with 1.2% in the previous month.
Loans backed by lodging and retail properties continue to be the worst hit. The total share of defaulted balances on housing, retail, industrial and office loans decreased in February.
- 20.6% of the balance of the home loan balance was out of date in January, compared with 21.5% in the previous month.
- 10.8% of the retail loan balance was in default, compared with 11.8% in the previous month.
- Long-term rates for other types of property were lower over the month.
- 2.7% of commercial home loan balances were long-term, compared to 4.0% in the previous month.
- 2.4% of office home loan balances were long-term, compared to 3.0% in the previous month.
- 1.7% of the multi-family credits were long-term, compared to 1.8% in the previous month.
Because of the concentration of hotel and personal loans, default rates for CMBS loans are higher than other sources of capital.
- 9.3% of CMBS loan balances were long-term, compared to 10.0% in the previous month.
- Long-term interest rates for other sources of capital were more moderate.
- 2.7% of FHA multi-family and health loan balances were long-term, compared with 3.2% the previous month.
- 2.0% of life insurance company loan balances were long-term, compared to 2.1%.
- 1.3% of GSE loan balances were long-term, up from 1.2% in the previous month.