Delinquency rates head further south

Leading data firms are noting significant drops in delinquency rates that have created historic lows among top investors groups, including those serving the CMBS and multifamily loan markets. CMBS delinquency rates (30+ days) fell to 5.58% in February, down eight basis points month-over-month and 120 basis points from the year-ago level, Trepp said today in a new report.

Continued delinquency rate declines are setting record lows across the commercial and multifamily loan markets.

CMBS delinquency rates (30+ days) fell to 5.58% in February, down eight basis points month-over-month and 120 basis points year-over-year, Trepp said today in its latest report.

It marked the 20th monthly drop in the past two years and the fourth straight month of declines.

Joe McBride
Joe McBride

“We’ve become accustomed to these declines, so it’s business as usual,” Trepp research analyst Joe McBride told Real Estate Capital. “The pace of new issuance is expected to be very high this year and fundamentals are improving, so there’s no reason to think this won’t continue.”

About $1.5bn in loans became newly delinquent in January; and just $550m in loans were liquidated in February, compared with a monthly average of more than $1bn since 2010.

But $4.5bn of CMBS 3.0 (single-asset, conduit deals) hit the market and more than $700m of loans were cured in February, more than offsetting the upward pressure on the delinquency rate.

Source: Trepp
Source: Trepp

“February’s near record low liquidation volume established somewhat of a floor on the delinquency rate, but new issuance and a good amount of cured loans helped push the rate down yet again,” McBride added, in the report.

The Mortgage Bankers Association in a separate report today noted delinquency rate declines across both the CMBS and multifamily markets in the fourth quarter.

The 60+ day delinquency rate for multifamily loans held or insured by Fannie Mae decreased 0.04 percentage points to 0.05 percent; and the 90+ day delinquency rate for loans held by FDIC-insured banks and thrifts decreased 0.15 percentage points to 1.14%, according to the MBA. (The MBA and Trepp loan pools for CMBS differ slightly, resulting in different rates, but both data sets demonstrate significant rate declines).

The 60+ day delinquency rate for multifamily loans held or insured by Freddie Mac and for commercial and multifamily mortgages held in life company portfolios logged minor increases of 0.01 and 0.03 percentage points, respectively. Despite those increases, rates remain historically low for loans across the board, data compiled by MBA shows. (see chart below).

Source: MBA
Commercial/multifamily mortgage delinquency rates among major investor groups (Source: MBA)
SHARE