Commercial Mortgage Delinquency Rates Increased in Third-Quarter 2023

WASHINGTON, D.C. (December 5, 2023) — Commercial mortgage delinquencies increased in the third quarter of 2023, according to the Mortgage Bankers Association’s (MBA) latest Commercial Delinquency Report.

“Not unexpectedly, delinquency rates on commercial mortgages increased for the third consecutive quarter,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “Every major capital source saw delinquency rates rise, driven by higher interest rates, changes in some property market fundamentals, and uncertainty about property values. CRE market activity remains muted, further complicating the situation.”

Woodwell added, “CRE markets are large and heterogeneous. Data from MBA’s own survey released earlier in the quarter show wide differences in mortgage performance by property type. Deal vintage, term, market, and a host of other factors also play into which loans are facing pressure. These differences are likely to remain important in the year ahead.”

MBA’s quarterly analysis looks at commercial delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. Together, these groups hold more than 80 percent of commercial mortgage debt outstanding. MBA’s analysis incorporates the measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another. As an example, Fannie Mae reports loans receiving payment forbearance as delinquent, while Freddie Mac excludes those loans if the borrower is in compliance with the forbearance agreement.

Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the third quarter of 2023 were as follows:

  • Banks and thrifts (90 or more days delinquent or in non-accrual): 0.85 percent, an increase of 0.18 percentage points from the second quarter of 2023;
  • Life company portfolios (60 or more days delinquent): 0.32 percent, an increase of 0.18 percentage points from the second quarter of 2023;
  • Fannie Mae (60 or more days delinquent): 0.54 percent, an increase of 0.17 percentage points from the second quarter of 2023;
  • Freddie Mac (60 or more days delinquent): 0.24 percent, an increase of 0.03 percentage points from the second quarter of 2023; and
  • CMBS (30 or more days delinquent or in REO): 4.26 percent, an increase of 0.44 percentage points from the second quarter of 2023.

Construction and development loans are generally not included in the numbers presented in this report but are included in many regulatory definitions of ‘commercial real estate’ despite the fact they are often backed by single-family residential development projects rather than by office buildings, apartment buildings, shopping centers, or other income-producing properties. The FDIC delinquency rates for bank and thrift held mortgages reported here do include loans backed by owner-occupied commercial properties. Differences between the delinquencies measures are detailed in Appendix A.

To download current report, visit: https://www.mba.org/news-and-research/research-and-economics/commercial-multifamily-research/commercial-multifamily-mortgage-delinquency-rates.

NOTE: In addition to this report, MBA works with its servicer members to develop the CREF Loan Performance Survey each quarter, which highlights delinquency rates by property type. For more information on the most recent results and the historical series, visit: https://www.mba.org/home/product/commercial-multifamily-loan-performance-survey-73258

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