Commercial mortgage defaults drop to pre-pandemic low in the United States

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According to the Mortgage Bankers Association, default rates for mortgages backed by commercial and multi-family properties continue to decline in May 2021.

The summary of the findings comes from the MBA Commercial Real Estate Finance (CREF) Loan Performance Survey for May and the latest Quarterly Commercial / Multi-Family Delinquency Report for the first quarter of 2021. The Commercial Real Estate Finance (CREF) Loan Performance Survey CREF loans was developed by MBA to better understand how the pandemic is impacting the performance of commercial mortgages. The MBA’s regular quarterly analysis of commercial / multi-family delinquency rates is based on third-party figures covering each of the major sources of capital.

“Commercial and multi-family mortgage default rates fell last month to their lowest level since the start of the COVID-19 pandemic,” said Jamie Woodwell, vice president of commercial real estate research at MBA. Pockets of high stress remain in housing and retail property-backed loans, driven by loans in the later stages of delinquency and foreclosure or REO. Quarterly measures of delinquency rates between the fourth quarter of last year and the first quarter of this year show a decline in distress in almost all sources of capital.

Key findings of the May 2021 CREF MBA loan performance survey:

  • 95.2% of outstanding loans were current, up from 95.1% in April.
  • 3.1% were over 90 days past due or in REO, up from 3.2% a month earlier.
  • 0.2% were 60 to 90 days past due, up from 0.3% a month earlier.
  • 0.5% were 30 to 60 days past due, up from 0.4% a month earlier.
  • 1.0% were less than 30 days past due, compared with 1.1%.

Home and retail loans continue to be under the greatest strain.

  • 20.0% of the home loan balance was in arrears, up from 20.2% a month earlier.
  • 9.5% of personal loan balances were in arrears, up from 9.3% a month earlier.
  • Long-term rates for other types of properties were at lower levels during the month.
  • 1.9% of outstanding industrial mortgage loans are long-term, unchanged from the previous month.
  • 2.4% of outstanding office mortgage loans are long-term, against 2.6% a month earlier.
  • 1.8% of multi-family balances were non-current, up from 1.7% a month earlier.

Due to the concentration of loans to hotels and businesses, CMBS loan default rates are higher than other sources of capital.

  • 8.2% of outstanding CMBS loans were non-current, up from 8.5% a month earlier.
  • Long-term rates for other sources of capital were more moderate.
  • 2.4% of FHA’s multi-family and health care loan balances were non-current, up from 2.1% a month earlier.
  • 2.0% of life insurance companies’ outstanding loans were non-current, unchanged from the previous month.
  • 1.2% of outstanding GSE loans were non-current, against 1.1% a month earlier.

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