Tuesday, March 18, 2008

MBA: Commercial Mortgage Delinquencies End 2007 At or Near Record Lows

Washington, DC (March 10) – The Mortgage Bankers Association (MBA) released its inaugural analysis of Commercial/Multifamily Mortgage Delinquency Rates for Major Investor Groups that shows delinquency rates ended 2007 at or near record lows for most major investor groups (see charts above, click to enlarge). Fourth quarter delinquency rates for four of the five largest investor groups – commercial mortgage-backed securities (CMBS), life companies, Fannie Mae and Freddie Mac – remained at or near historically low levels. For the fifth group, FDIC-insured commercial banks and thrifts, delinquency rates were lower at 2007’s year-end than during 5 of the previous 11 years and 10 of the previous 16 years. Together these groups hold more than 80% of commercial/multifamily mortgage debt outstanding.

“This is an important new analysis that helps cut through much of the recent ‘noise’ on commercial real estate finance,” said Steve Graves of the MBA. “Despite a great deal of attention being paid to economic uncertainty, it is reassuring to know that the performance of commercial and multifamily mortgage loans and bonds has remained so fundamentally sound.”

For life insurance company portfolios, the rate was 0.01% (see bottom chart above) – with only nine delinquent loans, amounting less than $19 million, out of a reported total of $245 billion. For Freddie Mac, the fourth-quarter rate was 0.02%. For Fannie Mae, it was 0.08%. For commercial mortgage-backed securities, the delinquency rate was 0.40%. Even for the fifth group – the FDIC-insured institutions, which had a delinquency rate of 0.80% – the rate of past-due loans was still lower than in five of the previous 11 years and 10 of the previous 16 years, the MBA found. Of $1.2 trillion of commercial/multifamily loans at FDIC-insured banks and thrifts, only $9 billion was 90+ days delinquent.

Comment: The general media consensus seems to be that credit is drying up, and the entire U.S. credit market is collapsing and getting worse by the day. This recent report from the MBA shows that the commercial real estate has never been healthier, at least in terms of delinquencies on commercial real estate loans, which are at or near all-time lows. It's not all gloom and doom.


At 3/19/2008 9:30 AM, Anonymous Anonymous said...

Even though the deliquency rates are relatively low, are they more of a problem now because of the amount of leverage used nowadays?

At 3/19/2008 10:14 AM, Anonymous Anonymous said...

If CRE prices keep dropping in real time and in projected time, then Mr. Margin Call and Mrs. Capitalization Rate will make their appearance in due course.


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